Around 80% of small businesses reported financial challenges in 2020, up from 66% in 2019.
So it’s not surprising to learn that many of these businesses relied on lenders for help—about half took out debt to address cash flow issues, capital investments, or other needs. This widespread need for credit creates never-ending opportunities for lending businesses.
However, lenders need to be incredibly efficient when serving customers. Slow processing times and complexity can result in a poor experience for customers, making it difficult for lenders to grow.
Also, some providers still rely on manual processes, which can lead to increased human error and negatively affects customer relationships. Other lenders use software that is outdated or doesn’t have automation to streamline the digital lending process.
On top of that, competition from alternative lenders is fierce. So, what can lending businesses do to overcome these challenges?
Deploying software that helps save time and money and increases your competitiveness is critical. A core lending platform provides all these benefits and more. Read on to understand what a core lending or core banking platform is and how you can use it to offer superior services.
What is Core Lending Software?
Core loan platforms help banks and lending businesses automate their processes and enhance the customer experience. They are an all-in-one digital loan solution.
With loan origination, portfolio management, customer relationship management, reporting, and more, core lending software enables time and cost savings that boost efficiency and productivity.
This type of software is crucial to helping lending businesses better service commercial loans, engage in digital lending, and generate customized reports that provide insights into how to effectively serve customers across multiple channels.
Comprehensive lending software is so essential that more than 65% of banks are exploring newer generations to deploy.
But developing a powerhouse lending system in-house can be complex, expensive, and time-consuming. And on-premise solutions can be difficult to maintain. That’s why so many lending businesses are turning to cloud-based platforms that are offered as a SaaS (software-as-a-service) platform.
Who Benefits from Core Lending Software?
An all-in-one lending solution helps both lenders and customers. By housing data in one place with software that’s hosted in the cloud, lenders can create new loan offerings tailored to their customer’s needs.
They can quickly launch new loan products, improve the current services they offer, and automate most processes to increase productivity and efficiency. All of this is done while increasing security and compliance and reducing costs.
This software also helps customers. They benefit from access to new loan products and a streamlined loan origination and application process. Customers can easily upload their information and apply for new loans. They can also count on quick responses on their applications.
Overall, the right core banking solutions create immense value for all stakeholders. And with a SaaS digital platform that offers visibility, automation, and compliance, you can stay competitive without making a considerable investment.
Top 6 Benefits of Core Lending Software
With cloud solutions, you can deploy the software quickly and easily. Your provider will incur all maintenance duties, so you won’t need additional IT professionals to keep your software up to date. But these are not the only advantages.
Here are six benefits of deploying a comprehensive digital lending platform.
1. A Single Source of Truth for Your Data
When you don’t have a core lending platform, you might use different software solutions designed to tackle one specific task at a time. As such, most of your data is spread out, and this can make it difficult to understand business metrics, generate reports, and gain insights into how you can improve.
With a single lending platform, your data is easily accessible in one place, providing a single source of truth. The software’s API integration can also connect all of your other programs, powering up the utility of your data. With a single source of data, you can analyze and act on insights in a timely manner.
Some lending cores allow for the attachment of preferred third party programs, such as originators or payment processors, ensuring lenders stay in control. These features ensure your loan origination, servicing, and communications are all kept in one place. There’s no need to switch between programs, allowing for true digital transformation.
2. Efficient Loan Calculations
Besides being complex, loan calculations are highly regulated. Every lending business needs to make sure they have performed the correct calculations to feed into the loan contract and inform the customer how their loan will be serviced.
When doing manual loan calculations, most businesses don’t include daily interest accrual or take into account long or short payment periods. With centralized software, you can count on your calculations to be complete and maintain accuracy and compliance with the Truth in Lending Act (TILA).
3. Easier Loan and Portfolio Management
Banks and financial institutions need to better understand the status of their loans and portfolios to improve servicing. This requires continuous categorization and grouping, which, when done manually, takes too many resources and a lot of time.
A cloud solution geared toward loan management can automatically categorize and group loans based on their loan status, sub-status, portfolios, and source company. It can tag and label accounts so loan officers can quickly grasp information about their customers and leverage it for improved services.
For example, if a customer comes in asking for a commercial loan, the officer can quickly see if this borrower belongs to a group that has paid off their loan before or is in the “Bankruptcy” portfolio. This information allows them to customize loan offerings, determine pricing, and improve overall loan management processes.
4. Minimize Human Error with Automatic Loan Payments
Every lending business needs to manage payments and ensure borrowers are paying off their loans or mortgages. But manually keeping track of every payment exposes you to human error, which can have consequences on profits, security, and compliance.
Automated loan servicing software can take care of that. Many software platforms have an AutoPay feature, which gives you the ability to schedule automatic payments periodically, such as every month. Borrowers can also schedule single or recurring payments, making it easier for them to repay their loans on time.
5. Streamline Loan Servicing
Collections is a key service of every lending business. In a traditional model, every collector has an assigned group of loans, which they need to search for individually. This takes too much time and affects a collector’s productivity.
With a comprehensive loan platform, you can create groups of accounts and assign a user to perform collections on each group.
By grouping these loans, a collector can find all their assigned loans in one place. They won’t waste time searching for each one individually. They can navigate from one loan to another, performing any necessary tasks in less time.
This type of feature improves the productivity of every lending business and bank, paving the way for a bright digital future in the lending industry.
6. Improved Document Management
Document management is critical for any lending business. Your staff needs to understand where they can find information about customers. But enforcing a proper document management process can be difficult without technology.
Most of your officers will save documents the way it works best for them, making it challenging to find the information later.
A core loan management platform can solve this challenge by making it easier to upload documents to a specific customer profile or a specific document section. Using software makes keeping your documents well-organized and readily available less of a hassle.
Ultimately, proper document management, along with automation and integrated data, improves productivity and efficiency. These benefits enable your staff to better serve your customers, which is key to running a successful lending business.
Power your Innovation
Staying competitive in the lending industry requires digital transformation. With a digital loan solution hosted in the cloud, you can improve productivity, reduce human error, and reduce costs.
By managing the loan process from origination to closing and bringing all data in one place, you can automate most tasks and free up time for your staff to properly service accounts and improve customer relationships. If you’re looking for a way to deploy a core lending program, start by exploring LoanPro’s features. LoanPro empowers tech-forward lenders through automation and data visibility. Contact us today and find out how LoanPro can help you simplify the complex.