A robust Loan Origination System (LOS) that can establish strong controls over the increasing bad debts rate in the industry and simultaneously be the panacea to the rising competition in the lending world, is the need of the hour.
When empowered by the right technological tools, the LOS can be turned into a sustainable competitive advantage for any lending organization. This guide delves into the core of the loan origination process and brings to the surface, the most key components of the system.
This guide is your go-to place for every little detail that you are looking for inside the loan origination system!
A resilient loan origination system is vital for the success of any lender. Understanding its various components and nuances is key to building one such system!
Loan origination involves multiple entities, heaps of complex but important data and many intriguing processes. Learn about the nuances of the process through its 10 stages.
Take a walk through the four credit reporting agencies of India and learn about their significance in the Loan origination process.
APIs are the recent buzzword in the lending industry. Find out how APIs can empower your lending business in today’s competitive landscape.
As competition increases, lenders are forced to fine-tune their processes. The blog summarizes workflow management in lending and how digitization is the solution to streamlining the business.
Mobile technologies have touched every industry sector and lending is no exception. Find out how mobility has affected lenders and lending organizations in recent years.
The loan origination process involves a series of stages, such as loan application, loan processing, underwriting, approval or rejection of loan application and loan disbursement when a borrower applies for a loan and a lender disburses the loan amount after thoroughly evaluating the borrower through this stages.
The process of loan underwriting involves the lender determining whether to approve or reject lending to a borrower after evaluating the borrower's creditworthiness. Effective loan origination software is used to make this stage much easier for loan underwriters.
IntroductionThe importance of CKYC (Central Know Your Customer) in financial
Overview The lending world has evolved significantly in the past
In India's financial landscape, Non-Banking Financial Companies (NBFCs) hold a
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After smartphone penetration, people are not watching their SMS at all. They use SMS only for OTP related transactions. That’s it.
But What can a Lender see in your SMS after you consent to them?
Lender can see income, expenses, and any other Fixed Obligation like (EMIs/Credit Card).
1) Income – Parameters like Average Salary Credited, Stable Monthly inflows like Rent
2) Expenses – Average monthly debit card transactions, UPI Transactions, Monthly ATM Withdrawal Amount etc
3) Fixed Obligations – Loan payments have been made for the past few months, Credit card transactions.
It also tells the Lender the adverse incidents like
1) Missed Loan payments
2) Cheque bounces
3) Missed Bill Payments like EB, LPG gas bills.
4) POS transaction declines due to insufficient funds.
A massive chunk of data is available in our SMS (more than 700 data points), which helps Lender to make a credit decision.
An interesting insight on vehicle loans for lenders.
A trend we are seeing today – the first-hand vehicle ownership is decreasing with time. Why? People are upgrading their vehicles in every few years because of technological advances. And, this can be seen more with the millennial generation.
So, what should a lender do in terms of financing?
– Estimating the residual value of the vehicle at the start of the financing period.
– Charging a borrower only for the residual value (which is the difference between the value after a few years and the current value)
Example: A bike currently is INR 1 lakh. You want to buy the vehicle for 2 years. A lender will estimate the residual value of that bike today and what it would be after 2 years. If the estimated residual value = INR 45,000, the lender will charge you only that (say, INR 55,000 with interest for this instance) during your tenure.
At the end of 2-year period, you have 3 choices:
1. Return the bike and upgrade to a new one without going through the struggle of selling it.
2. Pay the lump sum remaining amount to own the vehicle outright.
3. Extend the financing and own it by keep paying the EMIs for the remaining amount of the vehicle for the next 12 or 18 months.
Benefits for the borrowers?
– Flexibility to use a vehicle and upgrade to a new one.
– Affordability to not pay for the complete value of the vehicle with the intention to use for a lesser amount of time.
– Convenience in owning the vehicle.
Say goodbye to the old lending option and embrace the new way of financing for vehicle by lenders!
How many of us know this?
1) Tiktok does Lending ( is it an entertainment company or social media company or a fintech company?
2) Youtube China does Lending
3) Top 100 internet companies in China(no matter what business they are in) do Lending
The team which was heading Lending in Tiktok was the Advertisement team. If we do Ads, we do X no of revenue. But if we do lending, we’ll get X+30% more revenue. This is on the same Ad spot.
Ad team has transformed into a lending team, and in today’s world, it’s possible because the subject matter expertise can be put in as an API and given to you.
Embedded Lending as a service is becoming popular in India too, and I am happy to be part of this ecosystem.
The answer is No. Only the top 10 crore people have access to many credit products in India. Almost all Banks focus on this market.
Once you go beyond that, the credit access rate has dropped significantly due to multiple factors.
1) Customers who are having low income(30-40K per month)
2) Not earning from an employer who belongs to Category A or B
3) Not from Tier 1 or 2 cities
NBFCs and Fintechs focus on the above segment, pushing another 10 crores of people.
But in India, 70 crores more people are formally or informally employed, which still needs to be tapped.