Offering a loan, verifying the details of the borrower, and disbursing the loan amount is a simple process. But in large organizations, this can be quite cumbersome. Traditionally, a lot of manual work went into maintaining the loan management system, but thanks to loan management software, it has become much easier to verify the eligibility of the customer, automate the initiation, follow the loan origination system workflow diagram, and streamline the entire process.
The credit management system helps classify incoming repayments. The loan system is a scalable component that is fully automated. The software is well-equipped with machine learning algorithms to mitigate the risk of use. Loans to SMEs continue to grow, and thus having a digital platform in this highly competitive market is imperative.
Table of Contents
What is a loan management system?
- How Credit Management Software Improves Loans
- Key Features of Loan Management Software
- Loan Management System Functions
- Loan management System Features
- Benefits of Credit Management Systems for Banks and Financial Services Providers
- The Most Popular Loan Types Managed by Loantech Apps
A loan management system is a contemporary digital tool that is empowered by AI and used for the automation of all phases of a loan life cycle. This helps you eliminate all the traditional loan management processes, which were time-consuming, and required stringent and strenuous verification of applicants, their credibility, and financial information. This is how a loan management system can help lenders and borrowers:
- It monitors payments and rates of interest
- It provides useful analysis and insights into automating the entire loan cycle
- It is useful for retaining and managing customer information, creating new loans, and keeping a record of all financial statements for the lenders
The process of structuring, calculating, and managing a loan is very complex. Therefore, errors can occur at any stage, from false access to corporate or personal credibility to calculations and reporting.
The entire credit process involves the work of multiple employees and requires a lot of effort. Violations of many regulations not only lead to fines and regulations but can also adversely affect the company's reputation. In addition, young customers find traditional lending management systems monotonous and tiring. As a result, they are more likely to be attracted to companies that are willing to provide a purely digital experience.
3. Technologically updated
Leveraging big data, robotic process automation, NLP, and ML, the loan applications software recognizes smart lending software that can process more day-to-day tasks faster and more accurately than human workers.
The most important features of loan management software for lenders are:
Companies wishing to develop lending software may not have sufficient local infrastructure capacity to ensure uninterrupted operations, updates, and support. Scaling during peak loads and dealing with growing users and subscriptions can also be very difficult. For optimal scalability and availability, it's best to use cloud infrastructure.
2. Support for different types of loans
Loans can be of various types, and each category can have a different list of parameters requirements, and provisions. Some loans can be secured, while others can be unsecured. Keeping track of all kinds of loans, their usage, cost, benefits, and payment offers, the loan management software solution considers even the minutest of details of almost all kinds of loans.
3. Centralised data storage
Customer data is used at all stages of the lending process. The best loan management software stores this loan requirement customers database in a central repository accessible at any stage of loan processing. Traditional loan systems, on the other hand, use a siloed approach to data storage, making loan processing more cumbersome and time-consuming.
4. Built-in credit check function
The latest loan management software internally collaborates with credit bureaus to conduct reliability checks on its customers. The banks and NBFCs that function the loan management software are incessantly updated with the ratings and reviews regularly. The software uses big data analysis to assess the authenticity of the applicant.
For example, a customer's bank dealings, credit card handling, spending power, financial statement, and even social media activities can be applied for credibility assessment.
5. Routine process automation
Streamlining and automating routine processes like avoiding human error, maintaining security, speeding up loan composition, enabling loan processing, conducting customer verification, and using simple rule-based processes using robotics. The loan management software includes all of this
6. Built-in analysis module
The trends in markets, changing patterns of customer behaviour, innovative and digitalized products, new laws and regulations, and providing the customer with the latest deals and offers, can be handled by an in-built analysis module. Big Data and AI empower the loan management software to assess all these features and let the system grow, keeping the external and internal conditions and transformations in view.
7. Third-party integration
A viable loan management software has CRM and ERP solutions that let the system integrate with the third party or other business software, allowing for smooth collaboration. This can enrich the credit system and secure data and insights in a much more lucrative manner. Systems that integrate loan modules and remote sales software are also popular with lenders.
8. Cyber Safety and Security
Since the entire process is automated and digitalized, there is always a risk of cyber-attack and hacking. The loan management software carries confidential financial processes and sensitive data. Security is paramount to both lenders and customers. The loan tech apps ensure compliance, protection, and a high degree of safety and security. The entire data is related to network protection, customer safety, and loan management security.
From the first to the last step, the loan management software incorporates all the necessary actions taken to process loans. This includes:
1. Loan accounting software
Loan management involves the loan calculator. Estimating the interest amount, monthly EMIS, down payments, and recurring payments are all handled by the software which can be useful to all concerned parties
2. Online loan application software
To apply for a loan, you need to collect and submit a lot of paperwork and supplementary materials for verification and reliability checks. Online loan application software makes it easy for businesses and individuals to complete and submit loan approval applications, simplifying the financial institution's verification process.
3. Loan verification process
This includes all relevant steps wherein the credibility of the borrower is verified, his financial documents are thoroughly checked, and his ID and age proof are scanned and diagnosed, after which the final approval, based on the terms and conditions, is given to the borrower.
4. Loan processing system
These are systems that automate and simplify lending operations, such as Interest, fees, cost calculations, loan reschedules, refunds, and repayments. It is a comprehensive loan management platform that combines Loantech apps, security, compliance, calculations, and credit management capabilities.
1. Making lending easy
Anyone can go through a financial emergency and the need to borrow money can arise at any point in time. Whether it is a personal loan, a home loan, or a student loan, people may have an unexpected need for funds, and this is where the banks and NBFCs help the borrowers. If an individual maintains a steady credit report and is credible with his borrowings, along with a stable income, a loan can be provided to him after conducting a few formalities.
This process was lengthy, time-consuming, and, many times, left either the borrower or the lender with a poor experience. With the loan management system, everything has been automated incorporating AI and ML. You can provide a great borrowing experience by completing the application process online.
On the operational side, you can automate reliability checks, automate bidding systems, and speed up payments. Customers with better experience are more likely to recommend your company. These recommendations create new opportunities. Digital credit platforms are customer-centric systems. Self-service portals can simplify the borrower's journey and impress customers, especially the new generation.
2. Visualize ROI
The prime function and utility of the loan management software are to automate the loan management system workflow of the lending agency or bank. It is mandatory to maintain compliance and generate an error-free loan processing activity. Loantech apps have made this easier for all stakeholders. It has streamlined the process of the loan application, borrower verification, authenticating the documents, checking the credit history, and disbursing the loan to the borrower.
The functions don’t stop here, as till the end of the relationship, the software will track payments, defaults, and errors, and run analytical tools in credit management systems. This can help you understand how multiple sources of revenue work. You can also find out where you can save money and where you can invest more. Eventually, it raises the ROI for both the parties and with the inception of the software, lenders can focus on other tasks that need their attention
3. Paperless process
As the digitization of loan processing progresses, so does document management. Everything is centrally and digitally managed, eliminating the need for lenders to store files in large closets. You can view any file with just a few clicks and nothing will be lost. The traditional methods have been cumbersome wherein there was a need to fill in several forms, requiring multiple signatures and keeping the records and proofs of the borrower.
Now all this has been digitalized. Big data enables maximum storage of documents and makes the process smooth.
4. Elimination of human error
It is a well-known fact that calculations can be done better by algorithms than by humans. There are too many variables in the traditional loan management system, which makes it error-prone. However, the best loan management software is designed to eliminate errors, which is arguably an advantage in every respect.
5. Avoid payment delays
The traditional credit management approach had a poor approach to retrieving bad debts and due to manual processing, it became difficult for lenders to track and recover the debt. The loan management software analysis modules can detect even the slightest fluctuations in customer reliability and prevent payment delays at the right time.
They have the entire account updated which is posted simultaneously to the borrower, so that he knows, that his transactions, delays, and errors are scrutinized and monitored digitally.
6. Save time
Traditional loan management systems involved manual labour and human interpretation of data and storage. This was highly inconvenient, expensive, and time-consuming. Manual and paper-based loan management became a burden for all stakeholders and the online lending systems came to their rescue. It automates routines and allows teams to focus on other jobs leaving all data-related loan processing work to the loantech apps.
A loan management system requires a high degree of meticulous attention to detail. As a general rule, a well-rehearsed team should handle all aspects of the credit process.
7. Automatic report generation
The digital loan processing accounts for accounting at a massive stretch, invoicing, reporting, maintaining financial documents, and creating taxation reports. The loan management apps can automate reporting which becomes extremely valuable for regulatory agencies, lenders, and borrowers.
These high-priority reports must be delivered on-demand and contain 100% carefully selected information. The apps also have an in-built feature for tracking software to sustain error-reporting, defaulting, and compliance.
The loan management systems can handle various kinds of loan types like:
1. Mortgage loan software
The mortgage loan software or app is aimed at homebuyers that simplify the mortgage life cycle, application process, and mortgage refinancing.
2. Small loan Software
This Loantech software aims to allow customers to earn credit for all types of purchases, including credit cards, retail lending, and mortgages. It also follows the mortgage life cycle diagram.
3. Student loan management software
It helps maintain a financial balance between educational institutes and students that tracks calculations, reporting, security, maintenance, and management.
4. Business loantech apps
Business loans are used to invest in loan tech in start-up companies or to develop businesses in existing companies. These can apply from banks or NBFCs and the loan management software specializes in peer-to-peer lending.
5. Personal loans
These loans are intended for personal/non-commercial use and are majorly dependent on a person's credit history. These can be secured or unsecured.
6. Syndicated loan
The loan management software has the potential to manage details of multiple lenders providing debt to multiple borrowers over the same period. The amount of the loan can be massive for the lenders to process manually for which the software becomes an apt solution.
7. Payday loans
These are high interest but short-term loans used by people to bear costs until the next payday.
Currently, the financial market is imposing very high demands on credit products which include rapid processing of loan requests, providing scalability and flexibility to lenders and borrowers, increasing cyber safety and compliance, etc.
However, a good loan management system can handle these demands because of which digital loans are becoming more accessible and popular. This results in enhanced customer satisfaction, improved online lending, and customer-centric digital platforms. Businesses have the leverage to target a new generation of customers by incorporating professional loan management software that optimizes their workflows.