Lending: Maneuvering the Maze
When it comes to loan management, there’s a lot of room for error. From the first step to the last, the list of pitfalls, such as including things you shouldn’t or overlooking things that you should have included, is quite long. The disconnect between branches and loan operations—not to mention the back and forth with the customer—is a tricky maze to master.
As CRMNEXT continues our “Stories from the Frontlines” series, let’s consider the following (all too common) scenario.
In the Dark
Jenny, a 19-year-old with a decent salary and very little debt, walks into a branch to apply for an auto loan. She fills out the application, which is either snail-mailed or uploaded to a file and placed into someone’s inbox or a distribution list … then the process (and wait) really begins.
First: The quality analyst takes a look to see if they have all the information they need. If Jenny happened to leave off—say—the car’s VIN number, they can’t do the evaluation to see if the amount she’s requesting is worth the collateral she’s offering.
It’s sent right back to the branch, where they’ll have to get the missing information from Jenny, RE-review, and start all over again.
Round 2: The quality analyst now has the correct info and can begin underwriting the loan. They’ll do credit risk score – look at Jenny’s credit report and credit score, do debt to income calculating, and then assign her a risk (her likelihood to repay).
On top of that, they’ll do a loan to value calculation. The more depreciable the collateral, the less they’re going to loan her. They’ll then either approve, deny, or conditionally approve.
Now, Jenny still lives with her parents and has no credit. So, they’re going to require that she get a co-borrower on this particular loan – which will then help her to start building credit.
But here’s the kicker: all of this goes on in complete darkness – completely untracked.
The branch has no visibility into the loan status. They don’t know who’s working on it. They also don’t know if it’s in underwriting or if it’s still under quality. Jenny is pressing them because she’s about to lose the car to another buyer. And … it’s a mess.
Shed Some Light
Loan management can be so much simpler, with the right technology.
Your loan management system should let you deliver the good news faster — and provide updates on application status along the way.
Look for a workflow management system in which support starts from the first step in the application process. It should pre-populate most of the information, thus avoiding human error.
All data can then be connected to the case, including the uploaded application, and sent off to quality. Using a system with built-in guardrails for required fields, you’re assured no data is missing.
The right technology can also interface and pull a credit report. It can calculate debt to income, as well as loan to value. If a CU provides their credit risk calculations, the right system should be able to calculate that too and assist the underwriting team.
In addition, for less complex loans (like a credit card, for example), your tech should be able to go ahead and pre-approve offers. No human touch – beyond the initial data input – should be needed.
Finally, when it comes to eliminating “black holes” between loan operations and front-line staff, with auto-populated fields and automated underwriting for simple loans – the whole process can be accelerated, so members can put their money to work for them sooner.
So, do you want to master the lending maze? The technology to chart a simpler course is out there. The next step is up to you.
CRMNE[X]T marks the spot. If this piques your interest, click here to learn more about the transformation potential within your credit union.