What does a loan origination system do?
Loan origination is the process in which a borrower asks for a loan, and a lender either approves or rejects the application. The application process, from submission to funds disbursement or application rejection, is all involved in the origination process. Clearly, the loan origination system fundamentally explains the procedure for automating and controlling the application and disbursal operations.
Mentioned below are all stages in detail that a loan origination system follows –
This is the first step of the loan origination process, where the borrower must submit certain documents to the lender for review and approval. These documents can include ID proof, bank statement, credit score, etc.Â
In this phase, the applicant fills out and applies. Usually, this application is paper-based, but in modern times, lenders believe in a paperless environment, so everything is shifting to electronic banking software.
3. Processing of Application
At this point, the credit department has received the application, so now their task is to check it for accuracy and genuineness. The loan origination system plays a pivotal role in helping lenders assess the reliability of the borrowers.Â
A good loan origination system can help a loaner set up workflows for processing loans. It automatically identifies files lacking necessary fields, notifies the borrowers, and suggests updating the sales/credit department.
Once the application process is complete, and the borrower has provided all relevant data, the lender continues with the underwriting process. Lenders can check all data, including CIBIL scores, through a fully automated loan origination system.Â
The credit decision is the outcome of underwriting. At this point, the lender decides whether to approve or deny the application. Lenders nowadays make this decision with the help of loan origination systems. With AI-powered software, it is simple to evaluate various risk factors and ratings quickly.
This is the final stage of the application process, where the lender checks if the process is compliant and error-free. The application is verified one more time before making the final decision.Â
The borrower receives the loan after the whole application process is smoothly approved. Loan origination systems can monitor funds and ensure that the appropriate papers are signed before and along with funding.
Recently, the demand for a loan origination system (LOS) among banks and credit unions has increased. The end-to-end method of the loan process, including the application, underwriting, approval, paperwork, pricing, funding, and administration, is automated and managed by LOS.
Newgen's Loan Origination System software is built on a low code automation platform. It provides solutions to all kinds of loans, including retail, SBA, SME, and commercial loans. They fully abide by the compliance and regulatory requirements to meet all the needs.