How to build a loan management system?


In the financial sector, loan management or lending solutions have been the slowest in terms of digitization adoption.

Today, even though credit institutions have migrated from Excel sheets to a digital ledger, they are still far from having a solution that would give a holistic view of the performance of their products, automate loan processing steps and evaluate return on loan. capabilities of an individual in real time.

To bridge these gaps between a loan provider and full digitization, a loan management system has emerged.

As we progress through the article, we will look at what loan management system software is, the benefits it offers, and the features that make it the answer to a redundant set of management processes. loans. Why should you read it? With the digital transformation developing at lightning speed, the The loan management system software market is witnessing global adoption.

More efficient and faster than old systemit enables lenders to streamline and automate the origination, processing and end-to-end management of loans.

What is a loan management system?

A business loan management system is a digital platform that helps lenders automate loan management processes from loan application to loan closing. It enables credit unions, banks, payday lenders, mortgage lenders and other financial institutions to more quickly collect and verify customer data, offer new loan products, manage current rates, calculate interest rates, measure an individual’s loan repayment capacity, etc.

Moreover, these software comes with tools and sets of technologies that facilitate the process of consumer lending by generating reports with detailed analyzes and obtaining key information much more easily and efficiently for lenders.

Types of Loan Management System

Now that we’ve talked about the benefits of the high-level loan management system, let’s dive into the benefits. Understanding the benefits of the software can help you get to a point where you would be able to meet the expectations of how to create a loan management system.

Benefits of Loan Management System Software

The benefits of a business loan management system come in many facets. Let us dive into them.

1. Elimination of human error

In the lending ecosystem, there are a range of calculations involved. Calculations range from EMI percentage to loan disbursement amount based on individual credentials and loan term. These calculations can be error-prone when performed manually in outdated lending software spreadsheets.

A loan management system design is designed to handle complex calculations and give correct assessments almost in real time.

2. Save time

Managing a loan can be a lengthy process, especially since it involves a number of steps and lengthy due diligence. When you use loan management software, you can convert all manual documents and tasks into a digital setup, which not only automates routine processes, but also helps the team spend their time on other business-oriented activities. the company.

3. Generation of digital reports

Automating reports and moving them to real-time mode is a valuable feature of loan management system design. In the lending industry, reports such as accounting, invoices, and taxes are commonly requested by investors, regulators, and investors. These reports, which generally need to be submitted in less time, must be 100% accurate. Now, what these loan management software do is that they generate reports in the preferred formats very quickly and with the guarantee of high accuracy.

4. Gain competitiveness

Loan processing software is able to help lenders process applications, assign and monitor more loans, and review them comprehensively from loan application stage to processing. All this with the guarantee of an anti-piracy and anti-error system.

With the software that manages these activities, product and IT teams are free to review new lending product launches and improve their customer relationships, giving them room to gain a competitive advantage.

5. Make loans easy

The number of times an individual takes out credit in their lifetime is very limited. So, once they find a lending institute that makes the process easy for them, chances are they will become their loyal customers. Using digitized loan management software, businesses can simplify the application process, automate credibility checking, and automate the loan origination system, all to speed up disbursement.

Acquire help

These benefits offered by loan management system software are a result of the feature set that comes with the software. Another crucial aspect to be aware of when learning how to build a loan management system.

Loan Management System Features

Lending systems are generally designed to be scalable. This means you can start with simple AI-powered KYC functionality and then scale your software from there to a full-fledged loan management solution. However, when we talk about the minimum viable product (MVP) features of a full-fledged solution that meets all regulatory compliances, it looks like this –

Loan origination

It is the process by which borrowers apply for a loan and the lender processes it. The feature sets that should be part of this process are:

  • Digital KYC
  • loan document software
  • Credit history check
  • Provision of different types of loans
  • Automation of loan application and processing
  • Cloud infrastructure for loan availability and scalability

loan service

Each type of loan is different; they come with different interest rates, payment terms and due diligence measures. Loan management system service features allow lenders to calculate interest, repayment term, taxes, etc. It also includes sending payment reminders, monthly statements, collecting payments and collecting monthly payments.

Debt recovery

Reimbursement collection is a crucial feature for any lending business. The loan management system software must be able to notify when payments are due by the individual borrower, calculate late fees, perform tax calculations on the payment, and send reminders payment to borrowers. You can also add third-party integrations in the software that would automatically debit the payment from the borrowers bank account.

Reports

For a lending business, a reporting and analytics function is needed to create reports based on interactions with other businesses and individuals, examine the profitability of individual products, and the overall direction your business is headed.

The only thing that helps build the reporting features is the cloud integration. Thanks to the cloud, remote sales staff can access reports and share them easily.

Decide on the features of a loan management system can get a little easier when you know what category of business you belong to. Let me explain it a little further.

Startups – For small lending companies providing loans in small amounts, a loan CRM can be useful. It will have a basic level of loan management features like interaction history, borrower management, analytics, team management, customer information management, etc.

Medium-sized companies – They provide complex loans with a range of offers and a dedicated client portal. Through portals, customers can get involved in the process by tracking the loan application process, payments, remaining repayment days, and even interacting with the lending company.

Major Lenders – Institutions like banks and private lenders cater to millions of borrowers. They not only need full-fledged lending software for private lenders or banks, but also to keep security top of mind. Thus, at Appinventiv, when we carry out financial software developmentwe make sure to connect the software with platforms such as LOS (Loan Origination System), Experian Hunter, NetBanking Connect, CIBIL, Perfios, PDF Statement Analyzer, etc.

With that, we’ve covered another key part of how to build an LMS. Based on these features, there are a number of software programs that have come into the market, helping borrowers to be part of an easy loan process. While becoming a name as best loan management software.

loan management software

If you aspire to join the list of these best loan management software, it is imperative that you know the cost to become one, technically.

How much does it cost to build loan management system software?

The cost of partnering with an experienced financial software development company that has expertise in building LMSs can be between $60,000 and $80,000.

Let’s take a look at the tabular view of these cost divisions.

Tasks Completion time (in days)
Design 8
Website 12
Back end development 48
Front end development 52
Deployment 5

The number of days he returns is 125 days. Now if you convert that to 8 typical working hours, that would become 1000 hours.

Now, when you partner with a development company in Australia or the United States, the average cost they will charge will be between $100 and $120. The same will cost $60 to $80 when you partner with an agency in India.

This, in turn, will result in the cost of your loan servicing application anywhere between $60,000 to $80,000.

Get in touch

So here’s everything you need to know about how to create a loan management system. Ultimately, it’s important for lending businesses to know that as the digital lending space grows in popularity and usage, so does the demand for customer satisfaction. What’s important is that loan companies go digital and put the customer first. We can help.

Appinventiv’s fintech developers know how to build lending platforms that empower businesses to make better business decisions and improve customer response time. We help lenders meet the needs of tomorrow’s borrowers, today. Contact us and start your loan digitization journey.


THE AUTHOR

Sudeep Srivastava

DIRECTOR & CO-FOUNDER

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