Loan Management Software: Features to Look For

Loan Management Software: Features to Look For

Featured image by Antoni Shkraba

Using reliable software for loan management is one of the primary obligations of a trustworthy financial institution. Dependable and secure software reduces risk on both sides: Debtors avoid late fees and financial businesses avoid uncollectable indebtedness.


Managing Your Business’s Exposure to Credit Risk with Loan Management Software

Credit risk is the potential for losing profit because of a borrower’s inability to repay a debt. Managing exposure to this kind of loss is a long-standing challenge for financial organizations.

Loan management begins with strategies for assessing factors that can reduce your risk. These strategies help businesses make good judgments and offer lending terms that are beneficial to both parties.

This assessment must take place before you ever offer a contract for a potential borrower to sign. Pay close attention to the following factors as you assess a borrower’s credit-worthiness:

  • The customer’s credit history
  • Their ability to repay the loan
  • Any available equity
  • The borrower’s housing payment, whether mortgage or rent
  • A borrower’s current expenses and their other indebtedness
  • How well the borrower meets the requirements of the loan

Key benchmarks in assessing a borrower’s financial solvency are their debt-to-income ratio, their operating revenue, and their income stability.

You might also consider subjective feedback from colleagues and vendors other than your company that have a historical connection with your prospective customer.

But mostly you should rely on objective raw information such as their history of banking relationships and their earlier economic activity. Loan management software will provide you with such objective data.

How Loan Management Software Benefits Your Business

Software for loan management is key to analyzing borrowers’ credit scores. This software will also help you to evaluate your exposure to risk by qualifying the loans you offer. After the contract has been signed, the software will send out invoices and collect fees, among other tasks.

You can obtain such software programs through a number of businesses. Then you can tailor the software to your specific needs. Such tailoring could be essential if your company’s programs need to interface with borrowers’ existing home computers as well as with the legacy software of other financial institutions.

Features to Look for in Loan Administration Software

Loan management software establishes links to customers’ credit scores and other indices that could affect financial risk for your company. This analysis is essential for evaluating new loan applications as well as monitoring progress in existing loans.

Therefore, any software you choose should be able to adjust a client’s interest rates and assess other charges as necessary. This could be important if a borrower defaults on their debt to you or has and unusually high level of being in arrears.

With any loan management software you choose, you should be able to look up the number of outstanding loans your company has. You should be able also to search for various details by type and other characteristics.


Security in Management Software

There are high requirements for reliability in loan management software since it contains highly classified data about customers and their accounts. Lending management software must also have the ability to process a high volume of operations while maintaing the integrity of each piece of data.

Your customers have the right to expect this level of security with their information. Customers have also come to expect around-the-clock access to information about their loan, and the right software will make this feature available.

In short, the right loan management software will have built-in security as well as functionality. These features will enable your company to reduce its risk while also allowing your borrowers to manage their loans with you, along with offering them the help they need when they find they must borrow money.