5 Ways How Automation Can Improve Your Loan Origination Process?

The lending business is the cornerstone of banks and fintech companies.  Credit to a customer is an asset on the books of banks that grant the credit. Statistics of commercial lending for real-estate loans in the US are inching close to the 2.4 trillion dollar market. Although the lending business has grown steadily, the life cycle of a loan from the application-approval-disbursals and the complete pay-back stage is old-school and cumbersome. 

Banks and mortgage companies are turning to technology and innovation to overcome the laggards that are barriers to a smooth process for a loan application. The commercial lending business is more subjective and diverse now and understands the projected success of any venture that seeks lending. Innovative automation tools like commercial loan management software can change the landscape for the lending business of any bank, mortgage company, or credit union.

Loan Origination Process

The advent of loan origination software – LOS

Technology advancements have eased the processes of many businesses. Automation technology is common in manufacturing segments where turnkey machines perform all the tasks. Since the advent and growth of IT-related technology with advanced tools like artificial intelligence and machine learning, service industries have started automating many processes. 

The automation of the loans through LOS uses computers to perform end-to-end delivery of a lending process. The latest cloud and web technologies digitize all the steps involved in the credit assessment of a loan application. Digitation of the loan process is efficient, takes less time, and displays accurate information after verification with third-party API integration. 

Industry acceptance for loan automation software

Efficient companies focus on doing things differently and taking calculated risks to lead and innovate for business considerations. Likewise, traditionalists assume the loan business comes with many risks and should not be automated. However, there are several benefits of adding loan origination software to the arsenal by companies still considering one. 

Here are five ways automation can improve the loan origination process of lending institutions:

1. Operational efficiency

Credit assessment in its traditional form is a long and tedious process that involves the following steps : 

  • Collection of financial information of loan applicant
  • Due diligence of the data 
  • Credit decisions

Each stage has many checks; non-fulfillment of any point in the checklist slows the process down and may even result in the rejection of the loan for insufficient documents. The physical collection of a borrower’s financial information and collating it with verifiable sources for its authenticity takes time. Usually, this period can take up to a few days. 

But borrowers looking for a commercial loan have pressing needs for funds to support their business. They will not appreciate the inconvenient loan origination cycle. Ease of doing business and fast disbursal of loans are two factors that influence their decision in choosing lenders. A loan origination software can automate the entire process, reduce the time taken and deliver accurate risks while mitigating risks. 

2. Improves experience for customers and employees

The efficiency of automation can kill two birds in a single shot. Companies try to provide a seamless experience to customers to yield a brand’s goodwill but often forget to empower their employees with similar experiences. With loan automation tools in place, the ease of digitization takes care of both customers and employees alike; both will appreciate the efficiency, turnaround time, and quality of the result. 

3. Risk-compliant

Automation of a loan process accounts for all the data points required for regulatory and risk compliance. With digital tools, any application is screened thoroughly and rejected if it does not meet the eligibility criteria. 

Credit assessment is carried out by verifying the financial information sourced from the borrower with third-party sources like credit score agencies, the applicant’s bank’s master computer, and income tax returns. Other factors that will affect the commercial aspects of business looking for funds are checked for location, industry, political and local systemic risks, projections of cash flows with sensitivity analysis, and any other relevant points that may turn into risk in the future. Employees processing the loan can focus on challenging applications and advise commercial borrowers to correct the red flags in their applications. 

4. Easy integration

Every automated loan application verifies with third-party API integration for data sources like credit bureaus, CRM of borrower’s banks, payment gateways, e-verification providers, analytics solution providers, and internal bank verification tools. Integration with all the interfaces helps in clearing the loan application swiftly. 

5. Increases profitability

With the ease of applying for a loan through multi-channel platforms accessible 24/7, millennial and Gen-Z applicants who prefer to complete the paperwork without walking into a bank bring in more business. When the software can screen and approve more applications, employees can focus on post-disbursal client engagement activities that ensure small business owners get qualified opinion integral to their entity’s growth. It becomes a win-win case for the borrowers and lenders, with the former offering value-added professional advisory services for a small fee. 


In 2002 the first patent for loan origination software was registered. In the last two decades, various improvisations adhering to the three key points of simplicity, security, and speed have made this technology a must-have for improving the lending business of any financial institution. 

With each passing day, you will lose business to the competition and fintech companies that are not leaving any gaps in serving their borrowers with enticing loan products. After iterating the security features of a loan origination software, the hindsight bias of probable integrity lapses is dissuaded. 

Customers resonate with current technology and don’t like outdated processes. Whereas, millennials relate to loan origination technology, with the latest AI, ML, dynamic scoring models, and algorithms. Employees find it difficult to cope with inundating applications and lose work-life balance. By upgrading the loan origination process, lenders can service customers with customized solutions, process loan applications in record time, reduce human errors that compound to future risks, verify the truth of the financial information sourced, disburse loans and monitor for payments with auto alerts to pay in time.