The Loan Origination Process and Meeting the Digital Expectations of Borrowers

Loan Origination | Digital Lending | Baker Hill

Digital transformation is still a hot topic among bankers today. At the same time, many institutions have pressed pause on critical projects, like streamlining their loan origination process.

The COVID-19 pandemic has put digital lending back in the spotlight, with many community banks and credit unions realizing they still have room to grow in their digital strategy.

While there is always a reason not to pursue digital transformation, there are so many more reasons you should. 

Read on to learn how solutions like loan origination software can help digitize your process and modernize the experience for borrowers.

Meeting High Consumer Expectations

These days, consumers can accomplish just about anything thanks to connected devices, be it a smartphone, tablet, or smartwatch.

Smart assistants have taken this idea even further, allowing consumers to complete certain activities, such as purchasing household items like laundry detergent. 

As a result, consumers have higher expectations than ever, even when it comes to managing their finances or the ease of a loan origination process. However, the lending workflows for many financial institutions are still fraught with friction, which negatively impacts the borrower experience.

The good news is, technologies like loan origination software and digital lending platforms exist for financial institutions to modernize and streamline the lending process. Many institutions are already taking steps to upgrade their digital lending technology to accomplish this.

We want to help your financial institution remain competitive as the market continues to change. In this blog article, we’ll share a few basic steps to meeting your customers’ heightened expectations and significantly improving the lending experience.

Eliminate Friction in the Application Process

The first significant step to reducing friction in the loan origination process requires offering a quick and painless loan application. Some banks and credit unions have partially digitized the process with a loan processing platform. However, portions of the application still require a visit to the branch or mailing physical documents.

According to research from the American Bankers Association, of the banks that offer digital loans, only 47 percent have digitized document uploads, and only 41 percent support e-signature. To truly improve the application experience, financial institutions must ensure customers can complete a loan application online in its entirety.

Your institution should also utilize auto-fill technology for applications, which will vastly reduce manual data entry for prospective borrowers. This involves integrating with the financial institution’s core system, which pre-fills the loan application with fundamental data already on file to inform the loan decision workflow

By incorporating an auto-fill feature, you can ensure that more loan applications are completed the first time, submitted, and processed. Adding a save-and-resume function will also improve the convenience of completing an online loan application. Individuals can save their progress and finish the application later if needed.

For instance, if an applicant needs to obtain supporting documentation, being able to resume the application in the future is helpful. This also enables the institution to save the applicant’s contact details and then follow up with them at a later date, mitigating abandoned loan applications.

Another effective loan origination strategy involves offering an e-signature function that allows applicants to sign loan documents digitally. If the borrower can complete an application online, why should they have to step into the branch to sign documents?

Increase Transparency with a Borrower Portal

To further reduce friction in the loan origination process, add a borrower portal that applicants can use to receive status updates about where their loan is in the approval process.

A borrower portal can also streamline the loan origination process by letting applicants know if they need to upload any additional documentation to facilitate the approval, eliminating the need for a series of follow-up phone calls and branch visits to turn in documents. 

What’s more, a borrower portal can be programmed to directly send emails and other messaging updates to an applicant, which increases transparency and ensures your customer feels like a partner throughout the lending process.
Financial institutions that fail to adapt to consumers' digital expectations will ultimately lose market share to more agile institutions and emerging players like alternative lenders.

By upgrading your digital lending technology, your financial institution demonstrates its commitment to providing borrowers with the convenience, transparency, and fast service that today’s consumers expect and demand.

Ready to See How Your Digital Loan Origination Process Stacks Up?

Take our quick Digital Maturity Assessment to see where you stand and learn how loan origination software can help you execute a modern digital lending strategy that meets and exceeds customer expectations.

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