Can A Loan Management System Help Streamline Loan Processing and Approval?

As digitisation and adoption of fintech by consumers grow, lenders need to ensure their processes do not lag due to a lack of access to the latest technology.

Generally, the lending process involves multiple steps, from customer onboarding to disbursement. Traditionally, each step is carried out manually, which is time-consuming and often prone to errors.

When digitisation and fintech solutions are helping streamline user experiences, why should you not harness the power of fintech to simplify and hasten the lending process?

A Loan Management System (LMS) is a customised fintech solution which leverages technology to improve productivity and efficiency from the initial application stage to the last step.

This blog will explore how it benefits your organisation in streamlining complex manual processes. Let’s get started!

Boosting Productivity: 7 Ways a Loan Management System Can Help in Fast Processing and Approval

A loan management system is a digital platform that helps lenders automate loan processing from the initial application stage to the final phase.

Banks, Non-Banking Finance Companies (NBFCs) and other organisations dealing with loans can gain from using LMS due to benefits like faster access and verification of customer data, better management of existing loans and availability of detailed, analytical reports.

This is how a modern loan management system can help:

1. Smooth Customer Onboarding

The lending process is complex and requires keen attention to detail. Lenders have sizable teams working on the loan application process in a traditional setup.

As per a report, the number of loans disbursed by banks and non-bank finance firms (NBFCs) using digital technology increased by 12 times between 2017 and 2020.

The quantum of loans disbursed increased 12-fold between 2017 and 2020, from US$ 1.42 billion (Rs 11,671 crore) to US$ 17.26 billion (Rs 1,41,821 crore).

High document turnover and the high number of customers banks handle makes it time-consuming and inefficient for banks to handle everything manually. Automating the process makes it simpler to collect applicant documents employing conditional logic and lending rules.

Digital solutions speed up the loan processing steps by automatically processing the client and lending-related data without any manual intervention. Automation also benefits by doing away with silos inside an organisation that make sharing data difficult, leading to delays and inefficiencies.

2. Intelligent Application Forms

The loan management system helps lenders have intelligent E-forms based on conditional logic. The lender can create dynamic forms that gather relevant and valuable data from the users. Specific fields appear in the questionnaire only when the client selects a particular option or ticks a checkbox.

These forms aid in faster loan approvals by reducing the time required to request additional information or documents at later stages. Also, conditional logic forms help the lender gather additional information in specific cases, streamlining the lending process and reducing delinquencies.

3. Optimised Documentation Process

Intelligently designed KYC questionnaires help lenders assess the applicant’s risk profile and credit health. The banker can request required documents based on previously gathered information.

Consequently, the customer is saved from the hassle of extra paperwork while the lender can access the most appropriate documents on which to base their lending decision.

The documents required may vary on the risk profile and the type of loan, secured or unsecured. Digitising the process removes unnecessary delay and redundancy and makes it more personalised and efficient. As a result, customers can upload pictures of their documents on the lender’s portal for review by the lender.

4. Benefits of Paperless Operations

Document management gets streamlined with a loan management system, paving the way for smoother loan processing and approval. All documents are stored centrally and digitally; there is no need for bulky physical filing systems for maintaining records.

Any document can be accessed effortlessly within no time with a few clicks. Traditional systems are cumbersome for the lender and the borrower as well. Customers also have to fill out numerous forms, give multiple signed copies of their documents and maintain records and proof of all documents for their consumption.

The paperless documentation process also eliminates the need to involve any third party in storing and maintaining documents. However, keeping records digitally comes with the challenge of digital security, which is crucial for all organisations.

5. Reduction in Errors

Any error in the onboarding stage or, subsequently, can prove to be costly for the lender and the borrower. Errors ranging from calculation mistakes to missing documents or information and inaccurate risk profiling can lead to problems later.

Loan Management Systems use AI and Big Data to analyse and process information, thereby reducing the chances of any errors. If there are slip-ups, the apps quickly spot the error, flag missing or inaccurate data, and suggest the necessary changes.

6. Improved Efficiency

Automating manual tasks, apart from reducing errors, also helps save time. Jobs like tracking late or unpaid instalments, sending reminders and notices to defaulting customers, calculating penalties and recalculating repayment schedules are done faster and more efficiently with an LMS.

The loan management system simplifies the day-to-day operations; borrowers can get quick and accurate information for timely action.

From the lender’s perspective, it helps save time; organisations can divert resources towards high-value jobs and tasks that are more crucial for growth. Speed and flexibility also benefit customers; loan processing is faster, there is a reduced response time, and borrowers can expect better customer service.

7. Automatic Report Generation

Businesses engaged in lending or other financial services must provide reports to various regulatory authorities, their investors and borrowers.

Creating tax reports, reports on NPAs, or sending updated repayment schedules to customers are crucial for any lender. Accuracy and promptness are essential for reporting; the automated reporting features in the loan management systems help lenders generate reports of various types in different formats as desired.

The Takeaway

As the Indian economy continues to expand, there is a growing emphasis on financial inclusion aided by models like open banking, co-lending and more.

Organisations need to ensure that their technology matches the growth pace and also keeps up with the growing customer expectations and emerging trends.

Finezza has the right solution for you; a loan management system that is agile, flexible and allows efficient loan management.

Features like Dynamic loan document generation, Multi-disbursement, NPA management, Restructuring of loans, and Collections management make it the most suitable solution for all lenders, whether a bank or an NBFC.

Also, Finezza offers comprehensive compliance, generates accurate reports and provides end-to-end solutions that factor in all security concerns apart from streamlining operations.