A guide to your Loan Management SoftwareDate published: 06 Nov 2017
Looking for Loan Management Software (LMS)? Here are three things to focus on when selecting one for your business:
- How much are you willing to pay?
- Why does your business need a Loan Management Software?
- What features does your business require in a Loan Management Software?
To help you answer these questions, here is our guide on how to choose the right Loan Management Software for your business.
What is Loan Management Software?
As its name suggests, Loan Management Software was originally designed to help lenders build and maintain relationships with new and existing customers who have borrowed cash. Today, however, Loan Management Software has evolved from a simple contact management system into a robust tool that lets you manage leads, customers, sales, marketing, call centres, scoring, under-writing, payment processing, reconciliation, accounting, backend processing and other types of transactional and operational data, all in one easily accessible solution.
Although there are many solutions that can do this for lenders, the beauty of SparkLMS is that it can accomplish these tasks automatically, using just one solution. It can also integrate data from other areas of your business without any additional work. A Loan Management software gives lenders and their sales teams all the tools necessary to grow your business in a central hub with the least amount of work possible.
How much does a Loan Management Software cost?
The cost of LMS varies greatly. LMS Providers typically use a transaction-based pricing model, which can depend on a variety of factors, such as the number of active loans and the payment processed.
For the most part, you can expect to pay on a per-transaction, per-month basis or one-time cost depending on the model. You may also come across providers that charge a flat monthly fee but require larger packages or extra fees for support & maintenance. Pricing can range from $1 per transaction per month to hundreds of dollars per month, depending on your business' unique needs.
Don't have a budget for LMS software? Or maybe you're not sure that LMS software is right for your business, but would like to see what it has offer? One option is to schedule a demo of a few LMS Solutions in the market or try a free trial if offered by any of the vendors.
Do you need Loan Management Software?
LMS can make your life as a lender much easier, while also helping your agents and managers get the job done in a more efficient and streamlined way.
If the following statements apply to you, your business needs Loan Management Software:
1. You need a robust Contact management.
At its core, contact management part of the LMS is all about keeping information from various sources organized. If you're looking for a better way to store and manage customer information, LMS is the best solution for your business. It acts as an entire database for all types of insights on customers, including contact information, loan applications, loan and transaction histories, how customers browse your website, ways and times they've applied a loan with your company, demographics, interests, personal preferences and more. You can then use this information to segment customers for marketing purposes or to easily search for customers who fit specific criteria.
2. You're looking for an automated way to boost sales.
LMS doesn't just keep your contacts organized — it also offers a bevy of tools to help you boost sales and execute more effective marketing campaigns. These include:
Lead Generation.Find new customers by automatically taking-in leads from various sources like social media, website visitors, lead providers, inbound calls, newsletter sign-ups and more.
Email Marketing.Automatically build email lists, launch email marketing campaigns and measure performance. Loan Management Software can also send email reminders to customers and prospects to drive sales — for instance, by reminding them of abandoned loan applications, suggesting loan products or promotions that they may be interested in and other ways to make up for missed sales opportunities.
3. You're looking for an automated way to funnel your leads
A robust LMS doesn’t allow you to work on leads, thereby wasting your precious time. It integrates a configurable under-writing engine that does the first level of filtering your quality leads.
Under-writing.Qualify and filter leads automatically with pre-defined set of rules or criteria (Under-writing), so that, you only have to spend of quality leads when they are sent to Credit Bureaus for Scoring.
Scoring.From a lenders perspective, just qualifying leads is not enough to accept the leads because every lead is associated with a certain cost. The leads need to be scored for various criteria before they are accepted. There are various Credit Bureaus in the market that allows the leads to be scored and sometimes, the leads should pass through multiple Bureaus’ Verifications before they are accepted. A good LMS should allow such integrations of multiple Credit Bureaus to score leads and sometimes with an option to define order in which they should pass through each Credit Bureaus
Verification.Now that, we have the quality leads that need to be verified. Only at this point that, your Agents start calling the leads and go through various verification steps of Loan Application. A flexible Loan Management Software lets you define the verification process, call queue, agent allocation to different type of leads, auto originate loans for good leads etc. Any lead that passes this verification is ready for approval upon the customer signing the Electronic Loan Agreement.
4. You're looking to streamline the Loan Approval Process
Loan Agreement.The Electronic Loan Agreement binds the customers with the lender. Any lender’s choice would be to have multiple loan agreements for different loan types or products and the ability to add or truncate rules based on the lending rules of each state.
E-sign.Any lead that passes this verification is ready for approval upon the customer signing the Electronic Loan Agreement, which is called E-Sign. A good Loan Management Software either has an inbuilt E-Sign mechanism or allows to integrate with E-Sign Services like DocuSign or HelloSign. In-built mechanism obviously reduces the cost while integration allows you to use the service of your choice for E-Sign Process.
Loan Approval.The moment customer signs the E-Sign Document, the Loan Application sent to the Agent’s Manager for Approval. In case of a good lead, if an auto-origination process is defined in the Loan Management Software, the Loan Application is automatically approved and is ready to be funded. Other Loan Applications are approved by the Agent’s Manager and on approval and goes for funding.
5. You're looking to automate payment processing
Payment Processing.Once the loan is approved, it will be ready for funding. The funding can happen immediately or at the end of each day. An efficient Loan Management Software should be capable of defining when and how the funding should happen every. Usually, the payments are processed through ACH Providers. The Loan Management Software can integrate one or multiple ACH providers based on lender specifics.
Return Processing.Receiving returns from the bank or payment processors and updating them in the LMS can be quite a tedious task. The returned transaction must be charged with an NSF Fee or a Late Fee, which has to be notified to the customer. The LMS you choose should have the ability to automatically process this information.
Collection.Collections are a part of any lending portfolio. Non-performing loans may be handed over to collection agencies by the lenders. This follows a set of rules that varies based on the state and lender. The LMS you choose should have the means to accommodate the rules and should be flexible enough to change at any point of time.
Choosing the right Loan Management Software
Ready to invest in Loan Management software? There are many different types available, so choosing the right one is the key to making it work for your lending business. Here's what a lender need to ask a potential LMS Provider
- Is it built for your market and loan types?
- How easy is it to use? Can I easily train employees?
- How customizable is the software?
- What features are available to help me with sales, marketing and other aspects of my business?
- How easy is it to integrate with third-party providers I already use?
- What limitations are there to using the software?
- What engagement models and costing options available? Are there any setup or additional fees? What if I need to expand my portfolio?
- What type of security features does it have to protect my business's and customers' data? What happens if there is an outage? How is my data backed up in the cloud, and can I access it immediately?
- If I need help, what type of customer service do you offer? Can I reach you any time, or is there a long turnaround period?
Thanks much for taking time to read through this article. If you are interested in a demo of SparkLMS, write to us at [email protected]