Why auto lenders should use a loan management system

By
inGain team
September 15, 2022
5 minute read

If your company is in the business of providing auto loans, you should most likely be using a loan management system (LMS). Auto lending is already a fast-growing industry, but using an LMS can take your lending products to the next level in terms of opportunities for growth.

Most auto acquisitions are impulse purchases. There are two main aspects that promote good business between loan providers and car dealers: the first is fast time to offer, and the second is convenience,” says InGain CEO Armands Liseks. InGain has extensive experience in providing LMS solutions for auto lenders.

According to IT company Wolters Kluwer, the transition toward digitally streamlined processes is one of the top three trends driving the auto lending industry in 2022. “Digitisation has not only delivered more remote, self-service, and automated options but auto finance providers have also seen significant workflow enhancements, including faster processing, more reliable document handling, and mitigated risk.”

What is a loan management system?

An LMS is a lending solution that facilitates end-to-end lending processes for both online and offline operations. A full lending lifecycle management system enables lending processes to be fully automated, from customer onboarding through to loan origination, loan servicing, collateral management, warnings and debt collection.

The loan origination process covers everything up to your company issuing an auto loan. The processes will be customised to fit your business model, and can be adapted to cover a broad variety of auto lending products.

Auto lending LMS product features

Keep your company’s future expansion in mind and choose a loan management solution that can facilitate a broad variety of auto loans. An LMS should allow you to easily develop a new product from a catalogue. Depending on the chosen product, you should be able to adjust terms and calculation methods based on interest rate, commission, penalties & grace period, early repayment policy, etc. Here are the auto lending product features you should expect your LMS to cover:

1. Pre-approval

Pre-approval or customer qualification is a crucial part of the convenience factor when aiming for successful cooperation with car dealerships. They should be able to enter a potential customer’s data and be done with the process within minutes. As a result the car buyer can quickly establish their loan limit and general terms, and can therefore continue with the auto purchase keeping in mind their finances.

2. 3rd party APIs

Fast links via APIs to third parties such as credit bureaus and car dealerships allow for speedy onboarding, decreasing the crucial metric of time to offer. As previously mentioned, auto acquisition can frequently involve spontaneous decision-making. Linking to third parties via the LMS allows a car dealership to easily cater to these types of customers.

Moving these processes online also eliminates the need for physical paperwork. Once the relevant data is entered, all that’s left is for the customer to sign off using a qualified e-signature.

3. Instalment calculations

An LMS should support the most common methods for calculating instalments including annuity, linear, flat and other methods, as well as accounts for commissions, management fees and extra payments. Offer generation modules can provide easy loan scheduling opportunities for individual risk-based offer provision to the customers.

4. Secured loans

An LMS should support secured loans, for example, a vehicle leasing with collateral. In this case collateral management is an important part of loan servicing and should include asset valuation/ re-valuation and insurance management. Choose an LMS that includes the option to connect to the third party registers, such as car registry etc.

5. Additional features

Some additional features you may want to look for when choosing an LMS for your auto lending needs include an option to acquire new customers via brokers and affiliate networks. This feature can be further streamlined into a white-label website or mobile application with a predefined customer journey, including multiple company representative onboarding, as well as ready customer self service portal. When choosing an LMS find out whether a partner website is available for on-site customer onboarding, scoring and agreement signing at auto dealerships.

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For over 10 years InGain has been supporting the consumer finance industry, fintech companies, and banks with an out-of-the box, yet fully customisable loan management system. On top of the core system, the company also delivers system integration services and custom feature development. InGain has executed hundreds of projects with more than 50 global clients across a variety of sectors.

The loan management system caters to both secured and unsecured business and retail loans, including instalment loans, auto leasing, mortgages, line of credit, buy-now-pay-later, payday loans, invoice factoring and more.

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