Financial institutions are currently dealing with increasing borrower defaults and delinquencies due to the economic downturn. Yet many responsible consumers prefer to take a proactive approach and request a loan extension when they’ve fallen on hard times. Here, we’ll discuss how banks and auto lenders can use automated workflows to streamline and expedite the loan extension request process.
The Problem With a Choppy Loan Extension Process
Consumers who proactively request a loan extension should be rewarded with a low-effort, seamless process. Instead of forcing the lender to chase delinquent loans, they are coming out and raising a flag.
Unfortunately, too many lenders’ processes are cumbersome and inefficient. For example, a customer that is struggling financially and is about to miss a payment may put in a request for a loan extension. Yet if this request isn’t immediately captured, someone from the collections department who is unaware of the loan extension request may take heavy handed measures. Such missteps due to siloed communication and broken workflows carry a heavy price. They can be uncovered — and penalized — during audits, or result in customer complaints to the Consumer Financial Protection Bureau (CFPB).
The most commonly used automation tools do not address the underlying issues that lead to these outcomes. For example, lenders may use tools such as robotic process automation (RPA), which automates tasks such as adjusting payment terms, requesting documents from customers, and late waiving fees. While these tools succeed in digitizing part of the loan servicing cycle, they fail to eliminate the silos in the full workflow. So while the loan extension request may be processed, the journey isn’t complete. Loan advisors may still find themselves chasing customers for missing supporting documents or revised applications (if the initial form was incorrectly filled out).
Here are just some of the negative impacts of a broken loan application process:
- High rates of incompleted applications: Customers forced to go through multiple channels or agents just to request a loan extension may simply give up. This has real repercussions for the lender, who will have to initiate time-draining collections or repossession process. Such last-resort measures can be avoided if the borrower is given the chance to simply extend their loan.
- Prolonged turnaround time: Representatives spend an excessive amount of time chasing borrowers for supporting documents and signatures due to disjointed processes.
- NPS: Net Promoter Score, a measurement of customer satisfaction, suffers due to the stressful and choppy servicing process. In some extreme cases, this may even lead to complaints to the CFPB.
- eNPS: Employee Net Promoter Score matters, too. Loan servicing advisors often bear the brunt of customer anger and avoidance due to misunderstandings in terms of loan modifications. This can lead to burnout and loss of morale.
- Compliance: Poorly documented modifications can be uncovered during the audit process, leading to penalties.
How Automated Digital Workflows Can Expedite Loan Extension Processes
Automated digital workflows can alleviate many of the difficulties seen in loan extension processes. They ensure that loan extension requests are captured and processed quickly in a single automated flow from one channel.
With automated digital workflows, borrowers can submit all the forms and documents they need in real time. Here is an example of how loan extension requests can work within an automated workflow:
- The lender maintains a webpage showing all the required documents and forms to request a loan extension. A phone number is displayed — a direct line to a loan advisor.
- The customer gathers the proof of hardship and loan paperwork, and calls the loan advisor.
- The loan advisor sends the customer a text message containing a link to a secure session. There, the customer can fill out the loan extension request form, and upload photos of the supporting documents. The customer can also get their ID verified and provide an eSignature and/or approve terms and conditions of the extension.
- All documents and forms are securely stored in the lender’s CRM. eSignatures are tamperproof and come with a complete audit trail.
Lenders can also choose to make their loan extension process accessible by self-service. This can be offered to customers who may be uncomfortable speaking with a representative. The initiation point is different (e.g., everything can be completed via a customer portal), but the process is similarly digital and streamlined.
By switching to such an automated workflow solution, loan servicing departments can expect to see some of the following benefits:
- More intuitive processes: A single system controls the entire end-to-end process with a simple drag-and-drop interface.
- Digital tools in one digital suite: At various stages of the workflow, rules trigger the sending of requests for eSignatures, eForms, document collection, and ID verification.
- More streamlined processes: Easy and intuitive conditional rules can be set to ensure business logic between steps, within steps, and within form fields.
- Optimized: Each customer interaction can be optimized across touchpoints and existing systems.
- More visibility: Digital workflows come with dashboards that allow business leaders to gain visibility into the KPIs that matter most, such as completion rate of loan extension applications and turnaround time.
- Zero IT involvement: Managers can adjust their business rules according to their needs without requiring IT support or coding.
Faster Loan Extension Journeys Are Better Business
By allowing borrowers to easily and quickly request a loan extension, lenders save significant time and effort. Silos are eliminated, and the customer experience is greatly enhanced during a time of stress and hardship. To learn more about Lightico’s automated workflows for consumer lending, visit Lightico.com.