Lenders burn up a lot of resources on attracting prospects who apply for a loan but never close the deal. But while some measure of abandoned applications may be unavoidable, businesses should continue to look within when seeking methods of improvement.
Many loan application abandonment can be attributed, at least in part, to errors or bottlenecks that crop up during application processing. Lenders often find themselves in a no-win situation: While cutting corners on loan processing is a recipe for disaster, that procedure for approving loans can cost them clients if it can’t accommodate a customer’s preferred timeline.
Loan Application Processing Problems
Fortunately, there are other options to improve application processing in a way that bolsters your bottom line. Lenders have access to software platforms that centralized loan processing and client communications, alleviating some of the top pain points that lead to loan abandonments. Here are seven common problems that might be killing your company’s ROI.
1. Confusion Over Loan Terms
Most people applying for a loan aren’t familiar with how loans are structured, and they often need an agent or officer to explain basic features of the loan. Delays in communicating with loan officers or other business representatives can result in them losing interest in the deal—or, worse, turning to a competitor.
Lenders can address this pain point by providing multiple communication channels, including phone, video chat and/or text-based messaging, that enable real-time communication and accelerate the application process.
2. Delays in Completing Paperwork
Incomplete or missing paperwork can grind application processing to a halt. Lenders face these delays on multiple fronts, including the lag time required to deliver paperwork to all parties, as well as delays in having that paperwork returned.
In certain industries, this delay can lead to missed purchases and/or acquisitions, or the customer might have simply changed their mind regarding the loan they’ve applied for. It’s impossible for loans to be processed when the application materials aren’t in-hand, so lenders should prioritize a system to collect this paperwork as quickly as possible.
3. Errors on Forms
Completed paperwork doesn’t necessarily provide a green-light for processing. Missing fields, inaccuracies and other errors caused by human entry are inevitable, and they have to be corrected before processing can proceed. In cases where the lender isn’t actively in communication with the prospective borrower, these errors can cause a processing delay that increases the risk of abandonment.
Lenders should instantly communicate errors and have a way to directly interact with the customer where and when they can be reached and confirm data by having the customer instantly make changes to a digital form and re verify their signature on the changes.
4. Waiting for ID Verification
Gathering personal information, along with copies of government documents, can be a painstaking process. When companies hold firm by insisting on paper copies, they can create long delays that increase the odds of a lost conversion.
But most consumers have access to smartphones and cameras that can help them take quick, high-resolution pictures of the documents needed to verify their ID. Businesses need a system in place to quickly gather those documents from consumers, and seamlessly integrate into their CRMS and internal processes, expediting ID verification.
5. Gathering Signatures From All Parties
Getting everyone to sign on the dotted line is important, but parties may have conflicting schedules or be completing paperwork from multiple locations. E-signatures are a fast, secure way to expedite this process, enabling near-instantaneous document signing from anywhere in the world.
For customers demanding a fast turnaround, e-signatures can accelerate the approval process without creating any inconvenience. Getting an e-signature instantly from a consumers smart phone and bypassing cluttered inboxes further reduces time and chasing people even for e-signatures.
6. Incidental Costs of Paper-Based Processing
Reliance on paper creates additional costs that pile up over time. Consider the cost of buying paper and ink, as well as copying and shipping forms. Even when originators succeed in processing and completing a loan, these costs eat into a company’s profit margin.
If they have not already begun, lenders should implement a digital transformation of the entire loan process. Paper documents, files, printers and faxes can be entirely eliminated with the proper technology stack.
7. Going Through Terms and Conditions Document
In the course of finalizing a deal, clients receiving a loan will likely want to comb through the fine print—especially if the loan is a business deal where lawyers will want to review the conditions. To expedite the closing, it’s ideal to have open lines of communication so that the lender can answer any last-minute questions that might otherwise trip up a quick, simple signing. Getting a consumer to take time and read through these term and get tacit acceptance can become burdensome. If lenders could send get a consumer to read and accept the T&C’s via smartphone, they will see an increase in efficiency and deals closing faster.
In today’s tech-driven world, streamlined processing is critical for any successful lending business. If your organization hasn’t yet digitized their workflows and application processing, it’s time to consider how such a change might benefit your lending operations, improving the efficiency, time-to-close and ROI of loan application processing. Over time, these additional closed deals will create satisfied customers who become a valued source of revenue for your business.