Manual loan processing, from origination to disbursement and collections, is time-consuming and requires significant effort. It is also inefficient and error-prone, resulting in lenders spending time and resources troubleshooting.
Increasing loan application volumes and customer expectations are pushing lenders to seek efficient loan processing solutions to help them speed up their loan approvals.
In this context, straight-through loan processing (STP) offers lenders a solution to deal with the problems of legacy loan processing systems. It refers to workflow automation; loan applications move electronically through the entire process. That means the complete loan lifecycle is automated, from loan application to disbursement.
On the other hand, the automated loan processing system is an AI-enabled solution that uses the latest technology to automate all stages of the loan processing workflow.
Let us explore the synergy between straight-through processing and automated loan processing systems in facilitating speed for loan approvals.
Automated Loan Processing System: Coordination with STP
STP and Automated Loan Processing Systems are like two sides of the same coin, and both contribute to speeding up loan approvals.
STP can be imagined as an overall automated pathway a loan application travels on, while automated loan processing systems are the automobiles travelling on that highway. They are software tools that carry out specific tasks throughout the loan lifecycle and ensure the loan application moves smoothly.
STP and automated loan processing systems working together create a powerful synergy and offer the following benefits:
1. Elimination of Manual Tasks
STP automates the lending process from the application stage to funding. There is no requirement to fill out physical forms and re-enter data at different stages, helping save time for various stakeholders, such as customers, field officers, and loan officers.
Automated loan processing systems perform repetitive tasks like document verification and credit checks much faster; this allows loan officers to focus on more complex cases.
The straight-through loan processing model works in tandem with the loan automation process, and manual labour by underwriters is reduced by up to 80%.
2. Faster Credit Appraisal
Lenders offer diverse types of loans to their customers; each type may require evaluating different parameters for credit appraisal. Utilising STP ensures lenders have considered all risk factors necessary for the credit appraisal process.
A robust straight-through processing system helps lenders make informed decisions much faster than legacy systems by pulling from Big Data resources across every industry and consumer demographic, from e-commerce data to regional economics.
This quick access to a wide range of high-grade data sources allows agile credit assessments without compromising the quality of the decisions.
3. Reduced Bottlenecks
STP helps remove bottlenecks in the loan origination process caused by human intervention, which can slow things down. Information flows smoothly from one department to another, and officers do not lose time retrieving data or waiting for the required information to be available.
Pre-defined rules for decision-making ensure faster loan processing without waiting for a loan officer to review the process. Applications that meet predefined criteria do not require manual review by loan officers.
Handoffs between different departments often cause delays; STP creates smoother workflows and eliminates these hold-ups.
4. Quicker Loan Approvals
Automation of the lending life cycle leads to faster loan approvals. STP lending relies on the algorithms coded into the processes, which help make lending decisions based on a given set of constraints requiring no human intervention.
Specific factors, such as the loan value requested, collateral, loan-to-value ratio and more required for the requested amount, are all coded into the system, leading to faster loan approvals.
5. Reduces Delays Due to Errors
Manual data entry or decision-making can sometimes result in mistakes. Identifying errors and then rectifying them takes time and can lead to delays.
Automated loan processing systems ensure minimal errors; the correct information reaches the right people for speedier decisions.
6. Borrowers Benefit
STP and loan automation work together to benefit borrowers. Each stage in the credit lifecycle, including applying for a loan, document verification, processing, disbursing and even repayment, takes less time as the processes get streamlined.
Loans may get approved almost instantly if applicants meet all requirements, which benefits the borrowers tremendously.
Furthermore, applicants can get real-time updates about their application status through an email, text message, or even through a borrower portal, as well as what to expect next. This transparency reduces the waiting game and the anxiety that often comes with it.
To Sum It Up
Integrating STP with an automated loan processing system helps lenders eliminate bottlenecks, reduce human errors, have quicker credit appraisals and ultimately speed up loan approvals.
Lenders can service borrowers faster and focus on more complex cases. Scaling business becomes easier, customer satisfaction increases as loans are processed in optimal time, and lenders can focus on maintaining the quality of their portfolios.
Finezza, a leading cloud-based lending process management and analytics software, offers a comprehensive, flexible, and agile Loan Management System for efficient lending processes.
Some of its key features include the ability to support multi-loan types, flexible repayment frequencies, support for single/multiple disbursements and schedules, flexible payments module and more.
Book a demo to know more.
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