As an executive of an auto finance company, you are no stranger to the challenges faced by financial institutions in the wake of economic downturns. The increasing number of borrower defaults and delinquencies is a cause for concern. However, not all customers are looking to avoid their loan obligations. Many responsible consumers would rather take a proactive approach by requesting a loan extension when they've fallen on hard times. Unfortunately, the loan extension process is often choppy and inefficient, leading to incomplete applications, prolonged turnaround times, and unsatisfied customers.
In this blog, we'll explore how automated digital workflows can streamline and expedite the loan extension request process for banks and auto lenders. With the right solution, lenders can avoid defaults and repossessions, reward responsible borrowers, and improve their overall customer experience.
Why You Need to Streamline Loan Extension Requests: The Consequences of a Choppy Process
When a borrower requests a loan extension, they should be met with a seamless and low-effort process. However, many lenders' processes are cumbersome and inefficient. For instance, if a borrower is about to miss a payment and requests a loan extension, but the request isn't immediately captured, collections may take heavy-handed measures. This type of misstep can lead to penalties during audits or complaints to the Consumer Financial Protection Bureau (CFPB). Furthermore, the most commonly used automation tools, such as robotic process automation (RPA)
, fail to eliminate silos in the full workflow, leaving loan advisors chasing customers for missing supporting documents or revised applications.
Inefficiencies and complex paperwork have long been a challenge for lenders in the auto finance industry. The paperwork requirements for loan modification requests are often ambiguous and confusing, leading customers to make mistakes and submit incomplete requests. This creates a significant amount of back and forth between the lender and the customer, which can be a time-consuming process.
Moreover, collections departments in auto finance companies are often bogged down with legal demands and chasing customers. This takes up a significant amount of time and resources, which could be better utilized in other areas of the business. The result is a diminished agent and customer experience, which can lead to frustration, delays, and lost revenue.
A broken loan application process can result in several negative impacts, including:
- High rates of incompleted applications
- Prolonged turnaround time
- Decreased Net Promoter Score (NPS)
- Decreased Employee Net Promoter Score (eNPS)
- Compliance issues
Accelerating Loan Extension Procedures with Automated Digital Workflows
One of the key ways to overcome these challenges is through automation. By automating the loan modification process, lenders can significantly reduce the amount of time and resources required to process loan requests. This can be achieved through the use of digital platforms that offer customers a streamlined experience and simplify the application process.
In addition to automation, lenders can also benefit from leveraging data and analytics to improve their loan modification process. By analyzing customer data, lenders can identify patterns and trends that can help them better understand customer needs and preferences. This, in turn, can enable lenders to offer more tailored products and services that better meet the needs of their customers.
Furthermore, lenders can also improve the agent and customer experience by investing in training and development programs. By providing their agents with the necessary training and tools, lenders can empower them to provide better customer service and improve the overall experience for customers.
Automated digital workflows offer a solution to the difficulties seen in loan extension processes. With an automated digital workflow, borrowers can submit all the necessary forms and documents in real-time, eliminating the need to go through multiple channels or agents. Here's an example of how a loan extension request 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, providing 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 where the customer can fill out the loan extension request form, upload photos of the supporting documents, and provide an eSignature and/or approve the terms and conditions of the extension.
- All documents and forms are securely stored in the lender's CRM, and eSignatures come with a complete audit trail.
Lenders can also choose to make their loan extension process accessible by self-service through a customer portal. By adopting an automated workflow solution, loan servicing departments can expect to see several benefits, including:
- More intuitive processes
- Digital tools in one digital suite
- More streamlined processes
- Optimized customer interactions
- Increased visibility into KPIs
- Zero IT involvement
Improved Efficiency in Loan Extension Process is Beneficial for the Auto Finance Industry
the auto finance industry faces significant challenges related to inefficiencies and complex paperwork. However, by leveraging automation, data, and analytics, and investing in training and development programs, lenders can overcome these challenges and improve the agent and customer experience. By doing so, they can position themselves for long-term success in a highly competitive marketplace.
By simplifying the loan extension process, lenders can save significant time and effort, eliminate silos, and provide a better customer experience during a time of stress and hardship. To learn more about Lightico's automated workflows for consumer lending, visit the consumer lending use case demos
. By embracing the power of automation, lenders can reward responsible borrowers and avoid defaults and repossessions.