There is a wide variety of finance management software solutions available on the market that automate many fiscal processes, facilitate budgeting, and provide other benefits to banks and financial institutions.

One of the solutions that significantly alleviates finance management procedures for lenders is loan management software. This type of software helps money lending companies to streamline loan origination and handling as well as more easily comply with growing regulations, and much more. That’s why lending management software is rapidly rising in popularity among banks, credit unions, and others.

loan management system

In this article, we’ll have a look at the features of loan management systems, their benefits, and how they improve the lending experience for financial institutions and their customers.

What Is a Loan Management System?

A loan management system is a digital platform that helps lenders to automate loan handling processes from the application stage to closing. It allows banks, credit unions, mortgage lenders, payday lenders, and other financial organizations to gather and verify customer data much faster, offer new loans, manage the existing ones, calculate interest rates, and more. Above all, these systems include tools for generating quick reports with detailed analytics, providing valuable insights for lenders.

Loan management systems are especially popular among the North American financial institutions, contributing to the Loan Servicing Software Market growth of up to 48%, followed by the EU, Japan, and other countries.

Key Loan Management Software Features

For comprehensive and effective work, loan software management systems have to incorporate the features that cover all stages of loan handling and provide tools for detailed analytics. Here are the main features these systems should include.

Loan Origination

When a client applies for a loan, the lender needs to process it correctly. For this, they do the following:

  • get from the client various documents, including their Credit Score, ID Proof, current employment data, salary slip, and others;
  • ask the borrower some additional questions;
  • check the data for any mistakes, send documents from client service to the credit department, and add some missing information;
  • process all the gathered data and evaluate the risk scores, credit score, and others;
  • take the credit decision and sign the documents;
  • fund the loan.

If all the steps above are made on paper and manually, it can take up to a week to fund the loan. Fortunately, many of these processes are automated today. On the other hand, they often happen in unintegrated systems, resulting in longer data processing.

loan management software features

Loan management systems allow gathering all the data on each client in a single system and performing complex loan origination steps much easier in one or two app page tabs. This way, the lender can quickly make their lending decisions about a particular business or a client and check their credit history in an integrated CRM lending system.

Loan Serving

As the loan is funded, it should be controlled and managed by the lending company. There is much data that should be gathered on every loan, e.g. loan types such as business, mortgage, personal, student, etc., interest rates, payment dates, and other information. Lending companies can simply track each loan and make any amendments such as recalculating interest and fees, and much more.

Aside from processes and data management, the system can automatically collect funds via various sources such as credit cards or wire transfers, and others and automatically adjust the data on each client.

Debt Collection

For effective monitoring of the received payments, many loan management systems have a debt collection feature separated into a standalone page tab. It allows lenders to track each payment, notifies them when accounts become delinquent or on due repayments, offers a recalculating fees tool for the late payments, and fulfills many other activities.

The debt collection feature helps everyone in the team stay updated on the latest activities performed with each loan. Above all, it allows to track all the debtor’s payment history, communication with the client, make any payment modifications, and much more.

Reports and Analytics

For finance-related companies, it’s essential to generate detailed reports on how their cash flows. Reports and analytics feature allows creating visual reports on each company’s client or business as well as producing statistics on the overall company’s business activities, e.g. number of loans, paid penalties, ROI, total investments, and much more.

Benefits of Custom Solution Development vs. Off-the-shelf Software

There is a wide variety of lending software solutions each offering its own tools for finance management. Banks and other financial institutions can spend much time before they find software with features that entirely meet all their business needs. Another problem is that though the chosen solution 100% suits the current business processes it can lose its effectiveness with time as the company grows. Therefore, lenders often turn to build custom loan management software.

loan management software systems

Custom solutions, in their turn, offer lending organizations more flexibility and scalability. It means that these organizations can:

  • create their own digital solutions from scratch;
  • add the features they need;
  • effectively scale their applications up as their business develops.

How Bank Loan Management Software Improves the Lending Experience

Loan management systems make the complex processes of loan origination and management much easier for banks and other financial organizations. On top of that, companies manage to significantly streamline and speed up lending processes and decrease operational costs. Let’s have a closer look at how this type of software can improve the lending experience for these companies and their clients.

Speeding up and Streamlining Management Processes

Loan management is a complex process that requires much attention to detail. That’s why banks have entire departments for managing all the documents and aspects involved. Today, companies can’t afford to carry out loan management processes manually due to a huge document turnover and the number of customers they serve daily.

Digital solutions allow banks to speed up most of the lending steps by automatically processing client and lending-related data. Moreover, they decrease silos inside companies, providing access to the gathered data across several departments in one organization.

Reduction in Errors

Modern lending solutions usually incorporate the latest digital innovations such as AI and Big Data tools for information handling. They precisely analyze and process the entered data, significantly decreasing the possibility of human error. Above all, these apps can quickly notify clients and lending businesses about any incorrect or missing data and suggest the needed steps to complete loan origination successfully.

Prevention of Payment Delays

Lending software is an effective tool for preventing any payment delays. It incorporates strong analytics modules that can detect any fluctuations in client payments and re-assess their credibility. The system notifies the lender of these changes and also automatically sends notifications on the upcoming payments to clients, ensuring that they are covered in time.

features of loan management system

Automated Reporting

Companies that work in the finance lending sphere have to provide reports to various parties such as regulatory bodies, investors, borrowers, and so on. Automated reporting features in loan management systems allow companies to quickly generate reports of different types and formats with the data required by these parties.

Increased Revenue

With lending software, banks and financial institutions can process more applications and manage a higher number of loans. As a result, they increase their workflow and, therefore, income. Above all, these systems automate many processes, allowing employees to focus on their relationships with clients or search for new opportunities for business development.

Conclusion

Loan management software systems play a major role in the successful development of many finance lending businesses. They automate many complex lending and management processes, minimize the number of possible errors, reduce finance lending risks, and much more, enabling companies to search for new business opportunities and keep the competitive edge in the market.

Many banks and financial institutions prefer developing custom lending software rather than buying an off-the-shelf solution in order to effectively scale the requested apps and add the features that fully meet the business requirements of a particular lender. For this, they often turn to software development providers experienced in banking and finance development services. If you require a custom lending software solution to be developed from scratch or you would like to enhance your current solution, do not hesitate to get in touch with our development team.

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