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3 Benefits of Automating Loan Origination

3 Benefits of Automating Loan Origination

Lenders are currently facing operational and regulatory challenges. Balancing productivity while maintaining the quality of their loan portfolio is becoming tough by the day. Under the given circumstances, if lenders continue to operate with legacy systems that depend on manual operations, both operations and quality may suffer. Subsequently, the productivity of a lender and its market dominance takes a hit. 

Given the ever-changing landscape of business requirements, many small lenders are closing their lending operations. But such harsh decisions can be avoided by moving with altering times. Lenders can spend their time focusing on operational efficiency and enhanced customer experience by adopting a perfect loan origination platform

With the advent of AI and smartphones, customers of various businesses have heightened their expectations from enablers. Borrowers and banking customers no longer like to walk into a bank when they can operate everything with the ease of their mobile phone apps. Digitized loan originations solutions are sought after in a technology-driven world. Any customer would like to interact with an interface that is easy to use and provides end-to-end solutions with accurate results and quality. 

In such circumstances lenders, whether they are legacy large entities or medium to small enterprises, should look at the benefits of moving to loan origination software or LOS. Let us examine some of the benefits that a LOS can bring:-

Augmented growth

A digital LOS system automates the loan cycle from the inception to the closure stage. It reduces human intervention in the critical decision-making process to maintain the risk metrics and quality of a loan portfolio. Repeated processes between various stages of a loan application are eliminated as the data is populated and filled into pre-designed templates. Consequently, the loan origination process is accelerated, giving accurate results and faster disbursal of quality loan products. The lender can identify applications that will be good against bad loans in the future. In this manner, a better customer experience is delivered without compromising the health of loans that are an asset for any lender. 

The post-disbursal stages of tracking and monitoring the loan are also automated and thus help the lender to work closely with its clients to encourage them to pay-in time. All this is achieved without a need to increase the employee count by the lender or additional costs. When quality products are sold to happy customers without translating to higher costs, the growth is going to increase. A banker then can utilize the time to reach out to the under-serviced areas and establish their presence in unfamiliar territories and gain traction there. 

Few steps that automation of loan origination process aid in enhancing growth projections are:- 

  • Improve the experience for the customer by offering the product at the click of a button from the ease of their computers or phones. 
  • Increased speed of loan origination process with accurate results for easy decision-making based on critical credit assessment.
  • Minimal human intervention helps reduce human errors.
  • Advanced use of analytics to predict frauds or ineligible pre-qualifiers of loan applicants.
  • Round-the-clock service by a robotic system that offers all the relevant helping prompts on a real-time basis. 
  • Costs are scaled down with a paperless, self-serve loan origination process
  • Automated real-time analysis of the loan process to track and monitor for better efficiency. 

Adherence to Compliance and Regulatory Framework

Basel III regulatory reforms will soon be rolled out to all the banks. The stringent regulations and the mandatory compliance of these clauses are necessary to mitigate risks associated with the banking business. 

It is imperative to let the borrowers experience a seamless loan origination process with enhanced productivity for the growth of the lending business. However, the compliance and regulations requirements cannot be ignored while fueling this growth. 

Automated Loan Origination software is AI-driven, and uses deep neural networks that help lending institutions self-regulate their operations through efficient, and transparent workflow management.  

The new-age digital systems are also flexible to incorporate any new changes in regulations to keep up with compliance requirements. 

Advantage of Analytics 

Loans can be sanctioned only after carrying out the due diligence of the applicant’s ability to pay the loan in time. The loan analysis process involves time-consuming yet inevitable evaluation of the data and complex financial modeling through spreadsheets. The checks that need to assess the eligibility of the prospective loan applicant are important to determine their risk profile. In manual and paper-based loan origination processes, these stages are laborious and take adequate time. 

Automated LOS comes with features of analytic tools that help in running the spreadsheets and conducting the sensitivity analysis for any application within a few minutes. Just by reviewing easy-to-read dashboards displaying accurate results in infographics which also prompt the recommendation to approve or disapprove a loan, a banker can take a final decision. The analytics tools help both quantitatively and qualitatively in making critical credit assessments of every application. 

Analytics can also bolster the process-improvisations on a real-time basis. These tools actively show the areas where the process can be improved. They highlight the areas that need extra attention from the banker. For example, automated LOS analytics can show region-wise data where high-performing loan opportunities have been identified. Chances of repeating this success with minimum effort are possible, thus helping reduce the advertising budget for these areas. Likewise, areas that need more traction shown by the analytics tools, can avail higher ad campaigning budgets. In this manner, lenders can penetrate into markets that were not in the business domain earlier, without disturbing the foothold they enjoy in areas where their presence is already established. 


Automation and AI-driven business is changing the way people used to work. This is the first time, after the advent of computers, when the efficiency of any workflow management is testing new heights and changing the parameters of growth drivers at a rapid pace. Lending institutions will be able to focus on the subjective and personal interactions with clients instead of being caught up in the humdrum of paperwork by changing to LOS.

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