When a company needs to choose a loan origination system, they might think that the best decision is to go with the most popular one. However, there are several things you can do to be sure that you’re choosing the right system for your company. Here are five steps to ensure that you’re picking out the right system for your needs, not just because it’s popular and everyone else has it.
1. Improve the Health of the Overall Credit Portfolio
The health of the overall credit portfolio should be your primary concern when choosing a loan origination system. In other words, the best way to decide which system is right for you is to compare the systems’ success rates. If a system has a much lower-than-average loan approval rate, you’ll want to consider other factors when deciding which one is right for your company. If a system has a higher than average approval rate, but that’s because it generally takes more time or costs more money, then it might not be suitable for your company.
2. Decide How Vital Speed and Cost Are
Once you’ve analyzed the success rates, ask yourself how important the speed of loan approvals and costs are for your company. If you need to make timely payments, you might want to look into a faster-than-average system. Or suppose you have the luxury of being able to wait a bit longer to get funding. It is probably more feasible for your company not to have an overly high approval rate because it will take longer before funding is received.
3. Confirm Your Needs and Determine What’s Helpful During the Credit Decision Process
As part of your analysis, you should identify your company’s goals for each loan origination system. Think about the kind of transaction you’d like. A credit decision might be to make a loan or make a Line of Credit. Or you might need different types of credit decision options. If it’s Loan Decision, line up all the information required for the credit decision with appropriate sections on the template and make sure you have enough space for it.
4. Use a Loan Approval Tool if Available
Many systems now come with loan approval tools, which are little workbooks that can be printed out and used by loan officers in the field to write down what they need to negotiate with a borrower and prepare for a credit decision. If your system doesn’t have this option, you’ll have to make sure to print them yourself.
5. Make Sure You Have the Right Licensing for Your Company Type
If you’re a branch office of a national bank or credit union, you might be required to choose an identical system for all of your locations or purchase an extra license for each office location.
While it’s true that the most popular system on the market is likely the easiest to find support for, your company needs to do an in-depth analysis of what you need and what each loan origination system has to offer.