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Loan Origination System

What is Loan Origination System?

Loan origination is that the term wont to explain the method during which a corporation or a private obtains a loan from a lending entity like bank, NBFC, micro financing company then on.

Loan origination in India involves multiple steps, ranging from pre-qualification to fund approval and disbursal, and requires the presentation of key documents that support the interests of both parties involved. 

The need for fast gratification among the millennials has forced lenders to become technology savvy and embrace digital platforms quite ever. This has led to the increase of Loan Origination System (LOAN ORIGINATION SYSTEM) – a system developed specifically to support the application process for banks and other financial institutions.

LOAN ORIGINATION SYSTEM is vital for lenders because it plays a big role in allowing the lending organization to face out of the competition by eliminating inefficiencies, reducing cost of customer acquisition and enhancing customer experience.

This guide will take you through every step of the loan origination process and can explain how LOAN ORIGINATION SYSTEM employs various techniques to beat the drawbacks of the long written record process.

How big is that the loan origination industry in India?

Research says, that 22 million Indians search for new opportunities for credit, every single month. On a mean , there are about 590 Google searches for the keyword, “Loan Origination System” or “LOAN ORIGINATION SYSTEM” monthly .

While the pandemic may have accelerated some new trends and paved way for changes within the loan origination sector, the necessity for credit and therefore the Loan Origination System are sure to grow.

What are the problems that arise from the loan origination process and the way can LOAN ORIGINATION SYSTEM solve them?

In the traditional lending system, one agent or the connection manager acts because the face of the lending organization. This single person deals with all the stakeholders of the method and navigates through multiple layers to deliver the proper information to the customer also because the credit analysis desk.

From the method perspective, loan origination continues to be linear and involved manual interventions. This results in lack of transparency and predictability throughout the method . As a result, the turnaround of loan applications remain high (sometimes whilst high as 6 months) and causes operational inefficiency and customer dissatisfaction.

From the info perspective, manual entries cause multiple errors and therefore the concept of real-time data is nearly absent. While some lending institutions claim to possess automated certain workflows within the method , data tends to stay trapped within Word or PDF documents, and their real potential goes untapped.

While finding the proper technical solution to those problems, seems to be the foremost logical next step, skeptics think otherwise – what's the necessity to vary when banks and other lending institutions have practiced an equivalent for several decades?

To start with, the industry dynamics have changed. Customers have greater demand than before, and therefore the regulatory landscape has become more demanding too. From the business point of view, the value of Loan Origination System has gone up considerably and therefore the profits have come down.

As a result, lenders are choosing digitization to empower their own business also because the consumer.

What can we expect from the LOAN ORIGINATION SYSTEM?

Lending institutions mainly specialise in three important factors,

  • Increased efficiency and speed of operations.
  • Unfaltering customer experience.
  • Optimally managed risk.

Paper-based authorization processes or the utilization of spreadsheets to underwrite credit are often too cumbersome to realize these business goals. A robust, scalable, technology-enabled solution like the LOAN ORIGINATION SYSTEM is that the answer to the present business problem.

Note: Specific uses of LOAN ORIGINATION SYSTEM at each stage of the loan origination process has been discussed below.

Different Types of Users

So, who needs the Loan Origination System the most? Below may be a list of companies which will benefit for engaging a LOAN ORIGINATION SYSTEM.

  • Banks
  • Small Finance Banks
  • Non-Banking Financial Institutions (NBFCs)
  • Housing Finance Companies (HFCs)
  • Micro-Financing Institutions (MFIs)
  • Fintech Companies
  • Credit Cooperatives
  • Mortgage loan originators

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