Managing loans effectively is crucial for businesses. Any oversight or mistake in handling a loan can lead to legal sanctions and loss of reputation, and effectively ruin the business’s credit rating. Top accounting and finance software solutions tend to incorporate the necessary features for effective loan management, regardless of the number of loans a business is managing at a particular time. Read the full software guide...
Loan management software is a set of tools businesses use to manage the entire loan process, from origination and creation, to servicing and management, and all the way to processing and collections. It performs multiple functions such as loan disbursement, refinancing and restructuring; as well as account processing and credit scoring.
A loan management system eliminates the tedious manual loan application process. Users no longer need to deal with tons of paperwork as everything is digitized and streamlined in one central tool. As such, it helps minimize errors.
Also known as loan servicing software, loan management tools allow businesses, particularly financial and lending institutions, to efficiently facilitate and monitor client information, reports and statements and the creation of new loans. The tool also helps automate back end and front end tasks. Additionally, it acts as storage for loan documents and data that lenders can access and share anytime they need to.
This software solution for financial institutions and lenders automates the loan creation, calculation of interest rates and late payment fees, payments scheduling and collection of payments.
Some of the other features and functions of a loan management tool include loan origination, debt collection, loan servicing, communication tools, investor management, client management, document management and analytics and reporting. Loan management tools also offer the convenience of allowing clients to provide their electronic signatures instead of the traditional, manual option.
Aside from financial institutions and lenders, other parties that benefit from lending management software are mortgage companies, credit unions, third-party vendors for lending companies and banks.
Generally, there are three different types of loan management software. However, before figuring out what these are, it is essential to first know the various loan types users can manage using any reliable lending software.
These loans are for non-business purposes and handed out to individuals with good credit history. Personal loans usually require a co-signee, who signs the application and is responsible for paying the loan in case the borrower fails to do so.
A personal loan can be secured and unsecured.
These are short-term loans released to individuals in need of extra cash to cover their expenses until the next payday. Payday loans almost always come with high interest rates.
These loans are given by private organizations or the government and are intended to help students cover housing and tuition expenses, among others. Student loans provided by private groups have interest rates based on the individual’s credit record and capacity to repay. Federal student loans, on the other hand, come with government-mandated interest rates.
Loans of this type involve a bank or any financial institution and a company or business. Requirements for acquiring commercial loans include ability to repay (verified by documents like balance sheets) and current cash flow.
Commercial loans are used to cover expenses that a company cannot afford but are essential.
These loans involve one or multiple borrowers and different lenders, usually two or more. All the parties follow the same terms for their loans. Syndicated loans are commonly used for big projects that require a large budget. The amount is provided over a specified time period.
Mortgage loans help individuals, businesses and groups pay for their real estate purchase. These loans come with longer terms compared to the others on this list. If the borrower fails to pay the loan, the property is foreclosed.
This type of lending solution is ideal for small and medium-sized businesses. Since it is hosted on remote locations (the cloud), companies without dedicated IT personnel or departments won’t have to deal with system updates and management, among other things.
This type of loan management tool is focused on properly carrying out loan servicing and origination processes. It is ideal for businesses that want to focus more on profits and revenues, and not on functions and features.
This automated system allows multiple advanced vendor integration, which is essential for time and resources efficiency. Automated loan management software also has a simple, clean and easy-to-use interface.
This type of loan management software is ideal for businesses looking for functionality and flexibility, especially in terms of adapting to technology and its constant changes.
With comprehensive loan management tools, users benefit from complete or integrated integration.
There are too many loan management software vendors in the market, and new ones continue to sprout practically every day. As such, you need to know how to choose the right solution for your business or organization. Here are some tips to help you start out:
Check the current system that your business uses, or if it has one. Determine what’s needed to improve the system or what type of loan management software you need.
If you are managing a startup or a small business, a loan management tool with basic features and functionalities should be ideal. Just make sure it allows you to store client information and data, take care of credit lines and manage multiple lenders or loans.
For mid- or medium-sized businesses, features like automated collection of payments, tracking and monitoring of balances, payment scheduling and forecasting are essential.
If you own a large company or enterprise (such as a bank), the most important features aside from basic loan management functionalities, are security, protection and risk reduction. A streamlined workflow is also vital, especially since banks want to provide their clients’ needs in the most efficient and profitable way they can.
Find a loan management solution that allows you to customize according to what your business needs. Customized solutions help to effectively and efficiently address your business’ pain points. They target the specific problems that may slow down your business. As such, solving and correcting the situation/s is easier and quicker.
Choose a loan management solution that you, your employees and clients will find simple and easy to use. It should be user-friendly, which means it is easy to understand, convenient to use and lag-free. Check out its interface and ensure it is clean, organized and simple enough so even non-technical users can use it without having to call for technical support.
A good loan management tool provides a seamless and automated lending process. Using smart intelligence or artificial intelligence, the software should eliminate the need to complete loan cycle-related tasks manually. An automated system helps eliminate manual errors and reduce risks. It also encourages efficiency.
Turnkey lender is an ideal example for it automates the entire loan process—every step of it. It also uses machine learning algorithms for better security and accuracy.
Be sure to choose a loan management solution that has all the features your business needs: automated collections, loan servicing, loan origination, analytics and reporting, client management and document management.
Your chosen loan management software should allow third-party integration. Lending management is more convenient when ERP (enterprise resource planning) and CRM (customer relationship management) tools are integrated into your system.
You need a loan management software that collects client data and information in the most efficient and accurate manner. It is important to ensure information gathered goes beyond client’s job and credit history. Consumer pain points, tendencies and touch points are also vital details.
Any software vendor or company has to offer reliable customer service. An experienced and skilled customer service team that’s available anytime of the day is ideal. It’s not enough that the vendor’s website has a contact form; there should also be other alternatives such as real-time/online chat, SMS, email and phone services.
Using loan management software to facilitate the loan lifecycle offers many benefits. Here are some of them:
The best benefit any business or organization can get from a loan management tool is a simpler, easier, quicker and faster lending process. Clients do not have to wait for weeks or months for their loans to get approved and released. Lenders no longer have to go through grueling and time-consuming manual procedures to complete the lending process. You save a lot of time and resources.
Automation and online functionality help make the loan management cycle easier.
As mentioned above, loan management software makes the process more efficient. It improves business teams’ accuracy because the entire process is automated and seamless. Manual, human errors are prevented and risks are reduced.
Additionally, analytics and reporting tools allow you to come up with better, more informed decisions. Performance data is more accurate, which is essential for comprehensive analysis.
Loan management software gathers client data and this gives you information you can use for enhancing their experience. You and your team can come up with plans and activities that will encourage your clients to sign up for additional services or loans. One good example would be to give them special discounts or lower interest rates. Knowing what your clients want and how you can provide a satisfying experience for them is the best way to establish a stable customer-lender relationship.
|Analytics||Analyze and gain insights from data including web traffic, campaign conversions, sensoric output and more.|
|API||Application Programming Interfaces (APIs) are programmatic intersections with external products or platforms that allow for custom integrations with your own solutions or other solutions you are using.|
|Billing/Invoicing||Issue bills and invoices to customers, often combined with tracking capabilities for outstanding payments.|
|Budgeting||Planning and tracking capabilities for financial budgets and plans often used to manage funds across different departments or for investor / shareholder oversight.|
|Customer Management||Manage customer databases and/or track outstanding shipments, payments and more.|
|Dashboard||Dashboards are digital interfaces commonly used to visualise data or give quick access to important features and functions of online platforms. They often serve as an overview gateway in software applications.|
|Data Export||Exporting functionality can be used to streamline the migration of data sets and information across systems, platforms or applications.|
|Data Import||Importing functionality allows you to use data sets from other systems or platforms to cut down on data entry requirements or to more easily migrate records from similar applications you have used in the past.|
|Estimates / Quotes||This feature helps come-up with and generate estimates or quotes for products and services and is commonly used for selling custom solutions or solutions at high price points.|
|External Integrations||Integrations with other software products or platforms to improve efficiency and compatibility across systems.|
|Financial Analysis||Assess the viability, stability and profitability of a business or project.|
|Multi-Currency||Support of different currencies for payments, accounting purposes, taxes, reports and more.|
|Payment Processor||Integration with external payment processors like PayPal, Master or Visa, generally for credit cards and similar methods.|
|Report & Compliance||Attain tailored reports and checklists.|
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