Loan Processing and Applications

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Loan Processing and Applications

Loan origination is the first step in the lending/financial services process. This is the most crucial part of the loan servicing process. The financial sector is turning its attention to customer engagement and satisfaction by prioritizing product design and delivery aspects that meet customers’ needs.

The phrase “loan origination” is defined in a manner unique to virtually every lending institution in terms of where it begins, the many stages within the process, and where it ultimately concludes. Each loan form will have its unique approval procedure, which may be either human or automatic.

Let’s take you through loan processing and application steps.

What Are the Loan Processing and Applications?

Pre-qualification stage

At this point, the potential borrower will be given a list of materials they need to provide to the lender to move forward with the loan application process. Examples of this could be:

  • Credit score
  • Identification card
  • Bank statements
  • Employment details

After the borrower has provided this information and the lending business has had a chance to analyze it, the lender will issue a pre-approval, allowing the borrower to obtain a loan.

Application of the loan

At this stage, the prospective borrower fills out the application for the loan. This application may sometimes be completed on paper; however, most lenders today are moving toward an electronic form, which makes this stage completely paperless. Because of recent technological advancements, applications can now be submitted online via a website or a mobile app, and the data obtained can be adapted to the requirements of certain loan products.

Processing of the application

When an application is received by the credit department, the first thing that happens is a thorough examination of the document to ensure its veracity, authenticity, and completeness. If a required field is left blank, the form will be sent to the borrower or the credit analyst, who will then get in touch with the borrower to collect the missing data.

Underwriting

Complete applications trigger the underwriting phase. Currently, the lender reviews the application based on several factors, including the applicant’s credit score, the lender’s assessment of the applicant’s risk, and the lender’s own internal scoring standards (which may be business or sector-specific). As a result of the development of rule engines and API connections to credit scoring engines, this procedure is now entirely automated.

Decision on the credit

A loan application will be approved, refused, or returned to the originator based on the outcomes of the underwriting procedure. If some criteria do not meet based on the system’s rule engine, the parameters may be modified automatically, such as a decreased loan amount or changed interest rates.

Quality check

The loan origination process step involving quality checks is extremely important to lenders because lending is subject to stringent regulations. The application is then forwarded to the quality control team, which analyzes key factors in light of applicable internal and external laws and regulations. This will be the final time the application is reviewed before it is submitted for financing.

Funding the loan

The majority of loans get funded quickly after the paperwork is signed. For reasons of law and compliance, processing some types of loans, such as second mortgages, loans to businesses, loans secured by personal property, and home equity lines of credit, may take longer than expected. LOS can monitor the funding process and ensure the required paperwork is signed before or at the same time as the grant.

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