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Loan Processing Automation

Use Cases, Capabilities, Costs

Bringing 18-year expertise in financial software development, ScienceSoft helps banks and lending companies implement seamless loan processing automation.

Automated Loan Processing Software - ScienceSoft
Automated Loan Processing Software - ScienceSoft

Loan Processing Automation in a Nutshell

Loan processing automation is aimed to streamline all stages of the loan cycle, from risk assessment and decision-making to credit reporting and repayment control.

Automated loan processing software relies on artificial intelligence (AI), robotic process automation (RPA), optical character recognition (OCR), and other advanced techs to eliminate time-consuming and error-prone manual lending tasks.

Loan types that can be automated:

  • Commercial loans: term loans, business lines of credit, invoice financing, invoice factoring, merchant cash advances, SBA loans (for the US), and more.
  • Personal loans: unsecured and secured loans for personal needs, personal lines of credit, Buy Now Pay Later loans, mortgages, and more.

Essential integrations: A customer portal, accounting software, payment gateways, and more.

Implementation time: 10–15+ months for a custom automated loan processing solution.

Development costs: $200,000–$1,000,000+, depending on the automation solution’s complexity. Use our free calculator to estimate the cost for your case.

Annual ROI: ~225%.

Main Loan Tasks to Automate

According to Experian, loan origination automation is currently leveraged by over 70% of lending businesses, and the percentage of its adopters is rapidly growing. The popularity of automated loan solutions is driven by the software ability to foster improvements across all major lending areas:

Loan application processing

2x–25x+ faster capture and processing of digital and paper loan applications with the help of RPA, ML, and intelligent image analysis techs.

Loan underwriting

Borrower risk assessment in minutes rather than days and 100% accurate loan approvals due to AI-powered risk analytics, fraud detection, and loan decisioning.

Loan agreement management

Automated loan agreement creation to drive up to 4x faster loan issuance. AI-based suggestions on the optimal loan prices to maximize profitability.

Loan repayment control

Full visibility of open and paid loans and automated debt collection to achieve up to 300% higher productivity of the loan servicing teams.

Borrower interaction

Automatically processing >50% of omnichannel borrower inquiries and communicating loan-related details to clients using intelligent chatbots.

100% compliance with the required lending standards and 90%+ faster regulatory reporting due to automated compliance checks.

Key Features of an Automated Loan Processing System

For each loan processing automation project, ScienceSoft creates software with unique functionality tailored to the specific needs of a particular customer. Below, we share a list of features that form the core of any automated loan processing solution.

Automated borrower onboarding and pre-qualification

  • Configurable registration forms for borrower onboarding.
  • Setting borrower eligibility requirements (minimum monthly income, geographical location, credit history, etc.) based on the internal lending policies.
  • Automated data extraction from the documents provided by borrowers and data validation.
  • AI-enabled borrower pre-qualification against the pre-set requirements based on the data provided by borrowers and the data available in public data sources (e.g., credit rating platforms).
  • Automated borrower categorization by user-defined parameters, e.g., borrower type (a business or an individual), requested loan type, region, etc.
  • Geography-based KYC/AML verification.
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Task management automation

  • Automated assignment of loan processing tasks to the loan officers, risk analysts, and other relevant staff members based on employee availability, loan application value, region, etc.
  • Scheduled and ad hoc communications with borrowers.
  • Instant messaging for the internal communication among lending teams.
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Automated credit risk assessment

  • Automated processing of borrower credit documentation in various formats (PDF, digital image, JSON, XML, etc.).
  • Automated assessment of a borrower’s credit risk based on user-defined criteria (loan amount, monthly income amount, income sustainability, and other parameters with pre-assigned weights).
  • Automated scoring of a business’ credit risk based on default probability and loss given default models (for commercial loans).
  • Automated calculation of consolidated and distributed credit ratings for multi-entity borrowers.
  • Flagging the loan applications that require additional borrower information for credit risk scoring.
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Collateral management automation

  • Automated registration of a borrower’s financial and non-financial assets for secured loans.
  • Automated valuation of non-financial collaterals (e.g., real estate, cars, equipment) based on the analysis of available data on their condition and market prices for the assets.
  • AI-based risk assessment for various collateral types.
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Automated loan underwriting

  • Template-based creation of loan approval forms containing the loan application and all necessary borrower data and documents.
  • Automated multi-department loan approval workflow.
  • Configurable approval hierarchies (based on a loan type, loan amount, borrower location, etc.).
  • Automated approval or decline of a loan application based on user-defined rules.
  • AI-based suggestions on the alternative loan terms to propose to the borrower in case of declining the initial loan application.
  • Instant communication of the loan-related decision to the borrower (via email, messaging apps, or a customer portal).
  • Automated generation and submission of funds transfer requests upon loan approval.
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Loan agreement management

  • Template-based creation of loan agreements.
  • Calculating the due principal and interest/APR amounts for each loan agreement.
  • Automatically adding to loan agreements the appropriate covenant and penalty terms for late repayments (based on a loan type, loan amount, borrower’s risk score, etc.)
  • Configurable agreement approval and signing workflow.
  • Loan agreement status tracking (approved, signed, etc.) for loan officers and a borrower.
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Loan repayment control

  • Automatically generating invoices on due loan repayments and sending them to borrowers.
  • Real-time tracking of disbursed loans and loan repayment status (due, partially repaid, fully repaid).
  • Customizable loan repayment calendars.
  • Instant payment processing via the connected payment gateways.
  • Support for multiple loan repayment methods: bank transfer, card, check, etc.
  • Scheduled and ad hoc omnichannel notifications to borrowers about debt collection.
  • User-defined rules for payment rescheduling and loan prolongation upon the request from a borrower.
  • Alerts to loan officers on overdue loan repayments.
  • Automatically imposing penalties on a borrower in case of a missed repayment.
  • Automated reconciliation of the received loan repayments.
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Loan analytics and reporting

  • Calculating essential metrics such as average loan cycle time, average loan value, approval rate, profit per loan, and more.
  • Automated reports on the granted loans, borrower risk scores, debt collection progress, loan portfolio performance and risks, revenue and taxes, and more.
  • Scheduled submission of loan reports in the compliant format (e.g., Metro2 Format for the US) to the required credit regulators.
  • Trend-based forecasting of loan demand and financial gains under lending activities based on the historical data on loan transactions, financial market data projections on exchange and credit rates.
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Borrower data management

  • Centralized storage of all borrower-related data, such as interaction history and ongoing activities, credit terms.
  • Centralized borrower document storage for loan applications, loan agreements, loan repayment invoices, documents proving borrower creditworthiness.
  • A search engine with filtering and metadata querying to navigate borrower-related data and documents.
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Security

  • Compliance with IFRS9, CECL, GLBA, FCRA, FCBA, ECOA, MLA, FDCPA, TILA, Basel III, SOC1 and SOC2, SOX, GDPR and PSD2 (for the EU), other relevant global, country- and industry-specific regulations.
  • Comprehensive audit trail for loan-related transactions and user activities.
  • AI-powered fraud detection.
  • Documents e-signing.
  • Data encryption.
  • Configurable data retention and deletion policies.
  • Multi-factor authentication.
  • Role-based access control.
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Leverage Fast and Accurate Loan Processing

ScienceSoft’s team is ready to design and build an effective solution to automate the error-prone manual loan processing tasks and streamline loan-related decision-making.

Essential Integrations for Automated Loan Processing Software

Connecting your loan processing solution with the relevant back-office and third-party systems helps speed up loan origination and minimize lending risks. ScienceSoft recommends establishing the following key integrations:

Integrations for Automated Loan Processing Software - ScienceSoft

  • A customer portal: to process loan applications faster; to instantly communicate loan decisions to borrowers, send invoices, and notify borrowers of due repayment dates.
  • Credit rating platforms of the selected credit rating bureaus (e.g., Experian, Equifax): for facilitated credit rating checks and credit report submission.
  • Payment gateways of banks or independent payment service providers (e.g., Stripe, PayPal): for smooth processing and real-time tracking of loan repayments.
  • Bank accounts: for centralized tracking of loan-related transactions, timely transfer of the approved funding amounts to the borrowers, and streamlined reconciliation.
  • Accounting software: for accurate recording of loan-related transactions in the general ledger.
  • A business intelligence solution: for comprehensive loan analytics and reporting.

How to Achieve High ROI for Loan Automation

Relying on decades-long experience in financial software design and development, ScienceSoft’s consultants defined the main factors that help drive maximum payback from automated loan processing.

End-to-end automation

To eliminate time-consuming manual workflows and free up the lending teams for high-value tasks.

Advanced analytics

To ensure accurate decision-making and leverage data-driven forecasting of borrower payment behavior.

Focus on security

To protect your IT system against all types of cyber attacks.

ScienceSoft’s Senior Business Analyst and Financial and Banking IT Consultant

Your loan processing solution needs to stay compliant with the up-to-date financial security standards and legal requirements for credit reporting. To avoid unnecessary headaches in the future, make sure your software offers flexibility to smoothly and promptly adopt the newly-emerging regulations.

Understand the ROI of Your Loan Automation Solution

Please answer a few questions about your loan processing tasks and needs to help our experts estimate the ROI quicker.

*What loan processing tasks would you like to automate?

*What capabilities should your automation solution provide?

*Would you need complex analytics and reports?

*What type of company do you represent?

*Which platforms should your loan automation solution support?

Would you require any integrations?

?

With other corporate systems, external data sources (e.g., credit rating platforms), or third-party services (payment, messaging, etc.)

Do you have tech stack preferences?

?

Particular programming languages, software platforms, cloud services, etc.

*Are there any compliance requirements for your automation solution? Choose all that apply.

*Do you have any preferences for the automation software deployment model?

What is your expected budget to implement loan processing automation?

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Ways to Set Up Automated Loan Processing

Business process management tool

Market-available lending software

Custom loan processing system

ScienceSoft recommends

Essence

Implementing OOTB general-purpose business automation software that enables digital service operations (including loan processing) and document management.

Implementing an off-the-shelf loan automation solution, which typically features RPA-supported processing of loan applications, automated credit decisioning, and repayment tracking dashboards.

Building custom automated loan processing software to get all necessary functional and non-functional capabilities and achieve 100% compliance with all relevant legal frameworks.

Pros

Establishing a cohesive lending business automation environment.

A fast and cost-effective way to leverage automated loan origination for SMBs.

Fully tailored features. The ability to leverage advanced techs (AI/ML, blockchain). Non-restricted scalability. Advanced security. Smooth integration with all necessary systems, including legacy software.

Cons

High licensing cost. Chances to obtain a large share of unnecessary functionality. Learning curve may be steep due to complicated UX and UI. Limited integration capabilities.

Pre-defined features, integrations, and processing flows. Customization can be costly or impossible. May not provide compliance with your local lending standards.

Software design requires additional time and investments.

TCO components

Initial setup costs + customization and integration costs + licensing fees (typically high due to a wide range of covered business aspects).

Initial setup costs + customization and integration costs + subscription fees that scale with the number of users.

Upfront investments in software design and development.

Lower TCO in the long run.

Which Approach to Loan Automation Fits Your Needs Best?

Answer a few simple questions and find out whether you should opt for a custom solution or a ready-made automation tool.

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You can go with off-the-shelf loan automation software

Looks like market-available solutions are a viable option to meet your automation needs. Turn to ScienceSoft if you need help with choosing the optimal ready-made tools, their implementation, customization, or integration with your existing systems.

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You definitely should consider custom development

A tailor-made loan automation solution will help you reap the unique benefits that market-available software cannot offer. Turn to ScienceSoft to get the detailed assessment of a custom loan automation system’s feasibility for your business situation.

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Custom loan automation software is your best choice

Looks like market-available automation tools don’t fit your specific business requirements and won’t be able to provide the expected operational and economic feasibility. Turn to ScienceSoft to get a consultation on custom loan automation software development and receive cost and ROI estimates.

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Costs of Loan Processing Automation

The costs and timelines of implementing custom automated loan processing software vary greatly depending on:

  • The number and complexity of functional modules, including AI-powered features.
  • The number and complexity of integrations.
  • Role-specific requirements for UX and UI.
  • Non-functional requirements: security, performance, scalability, availability, etc.
  • The sourcing model (full outsourcing, partial outsourcing, or all in-house).
Pricing Information

From ScienceSoft’s experience, developing custom loan processing automation software of average complexity may cost around $200,000–$600,000.

A complex system for credit documentation automation and intelligent loan decisioning may cost $1,000,000+.

Want to know the cost of your lending solution?

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Benefits of Automated Loan Processing

Loan processing automation can bring up to 225% ROI in the first year of implementation.

Higher productivity of loan specialists

Rule-based loan automation eliminates low-value and error-prone manual workflows, which enables a 35–50% improvement in the productivity of lending teams. Intelligent automation drives even more impressive results across particular tasks: for example, AI-supported debt recovery can bring a 3–4x increase in collector efficiency.

Lower operational expenses

By automating their service operations, loan providers can achieve an up to 50% reduction in operational costs, including labor, lending document processing, billing, borrower communication, and debt recovery costs.

Increase in loan origination volume

Automated loan decisioning helps speed up underwriting and credit issuance, assess borrower creditworthiness 70%+ more accurately, and minimize the risk of defaults, benefiting both lenders and borrowers. According to Experian, intelligent loan automation brings a 2x increase in loan approval rates while decreasing risk-associated losses by up to 20%.

Improved customer experience

Automation helps process credit applications and issue loans on average 2–4x faster. Plus, it ensures accurate and fair loan decision-making. These factors contribute to higher borrower satisfaction with lending services and drive an increase in client loyalty.

Simplified compliance

Custom loan processing software offers automated loan origination and servicing in accordance with all necessary data protection standards and industry regulations, eliminating the risk of regulatory compliance breaches.

Loan Processing Automation with ScienceSoft

In financial software development since 2005, ScienceSoft helps established credit services companies and lending startups implement robust loan automation.

Consulting on loan processing automation

We introduce an optimal feature set, architecture design, and tech stack for your automation solution and provide expert advice on security and compliance. You also get a detailed implementation plan with cost and time estimates and the expected ROI calculation.

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Implementation of loan processing automation

We cover end-to-end software implementation, including automation solution design, quality assurance, and integration with the required systems. Having proven tech skills and deep knowledge of the BFSI industry, we guarantee prompt development and top quality of the software.

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About ScienceSoft

About ScienceSoft

ScienceSoft is a global IT consulting and software development company headquartered in McKinney, Texas. Since 2005, we design and develop effective lending solutions, including automated loan processing systems. Being ISO 9001- and ISO 27001-certified, we apply a mature quality management system and guarantee that cooperation with us does not pose any risks to our customers’ data security.