A loan configuration plan is an essential part of a lending process. This includes understanding what the initial payment will be when payments change, and any additional fees that may be involved. As well, economic and industry factors should be considered as they may change over time.
Traditionally, most loan configuration has been done manually, resulting in slow processes and opportunities for error.
Luckily, new advances in technology have made the loan configuration process easier than ever before. With the use of loan configuration software, financial institutions can plan for their loans and configure them quickly and accurately. Plus, efficient automation allows lenders to better manage their portfolios over time.
Let's dive a bit deeper into the loan configuration planning process.
Planning For Loan Configurations
Lenders planning for loan configurations need to consider how their lending criteria affect the borrower. While borrowers may be able to choose from a wide range of loan repayment plans, lenders must limit their options because not all plans can work for every lender or lending institution.
Loan configurations require lenders to make major decisions at the beginning of their relationship with borrowers. These plans are very different from traditional monthly repayment schedules, which allows lenders and borrowers to take more time when negotiating terms for a loan.
There are four main types of configurations: interest-only, fixed payment, graduated payment and negative amortization. Each type has specific requirements that lenders must follow if they want borrowers to qualify for a given plan.
Poorly executed loan configuration can result in borrowers defaulting on their loans and lenders losing money.
Lenders should take steps to create a plan that will allow them to meet the needs of borrowers while increasing revenue.
Strategizing Loan Products
Lenders looking to configure loans should consider their product mix.
Depending on your business model, you might need to configure certain loan products over others.
For example, if you are in the mortgage industry and offer many types of mortgages (fixed-rate, adjustable-rate) then it would be beneficial for you to have software that supports configuring both fixed and adjustable-rate mortgages.
Similarly, you want to make sure that each product is configured as it should be (fixed-rate mortgages are fixed throughout their life vs adjustable-rate mortgages which are fixed for a short period of time).
A successful configuration plan includes having the necessary software to support each type of mortgage.
How To Set Up Loan Configuration Software For Success
A successful configuration plan includes having the necessary software to support each type of loan. As well, it should be able to easily best competitor rates in your industry.
Additionally, if this is going to be an internal tool as well as a product, make sure it has the ability to be customized and is user-friendly. You don't want your employees to struggle with a complicated system because it will lead to mistakes and errors.
While you can use any number of software programs to support your loan configuration plan, it’s always easier to have a single tool that can handle it all.
Infinity Software works together seamlessly with each of our partners to ensure your loan configuration plan is optimal. By moving all loan configurations to a single software program, not only can you decrease the time it takes for loan configurations but also outperform your competitors.
What Can Loan Configuration Software Do For You?
One of the primary goals for loan configuring is to ensure you are maximizing your revenue by helping each customer get their perfect payment plan.
Loan configuration software can help you communicate with customers, match products and services together, optimize payments, check credit scores and more all in one place.
Loan configuration software also allows you to make quick and easy modifications or changes to your loans. If you need to change repayment periods or interest rates, or respond to economic or industry changes, the process is streamlined and quick.
Once these changes are made in your software program, they automatically update all connected systems so there is no need for manual entry or data migration. With Infinity Software’s interconnectivity and API capabilities, it will seamlessly integrate into multiple different systems.
Loan configuration software can help you in the following ways:
- Simplify client communications
- Make quick changes to policies that can be viewed by all
- Maintain clear records of all configuration changes
- Ensure security across your loan management system
Ensuring Security Across Your Loan Management System
Every decision made by a human is prone to errors and inconsistencies, causing security issues.
In loan configuration planning, this issue can be mitigated by using a software platform with built-in verification and security checks. This ensures that no changes are made to the system without it being documented for accountability, traceability, audit trails and regulatory compliance.
Lenders who implement automated configuration software have the advantage of better control over their data.
Automated lenders can set up rules for configurations, enforcing them with alerts to prevent human error and fraud. Automation also provides an audit trail that is difficult to tamper with. As well, it reduces maintenance time and costs by eliminating the need for manual updates.
Why Manual Loan Configuration Has Had Its Day
Lenders who still rely on manual loan configuration software may find themselves at a disadvantage as their competitors embrace automation.
Manual loan configuration faces issues such as:
- Relying on fallible human memory
- Difficulty in keeping accurate records of configurations and changes
- Lack of standardization across the business, as there is no software platform to enforce rules.
For lenders ready to jump into the modern age, loan configuration software can guide you.
Start Your Loan Configuration Planning Process Today
Loan configuration is an important part of the lending process. It also allows lenders to better understand their client base and offer customized loan products for those businesses that require them.
To start your planning process, first determine which loan configuration best suits your business. Then, create a plan to configure the loans and update it as needed for new products or changes in your funding needs.
You should also be considering loan configuration software to make your configuration process more secure and efficient.
Ready to get started? Contact the Infinity team. We can help you configure your loan payments on the fly, or show you more options for configuring loans that will save time and money over the long term.
Schedule a demo today!