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February 9, 2023

Guide On Loan Origination Software

February 9, 2023
Read 7 min

The world economy generally is based on taking loans. Usually, the borrowed sum is used for investments and then the loan is paid back from the profits received. Such a scheme equally applies to individuals, small businesses, huge enterprises, international companies, and even countries. The only difference is the algorithms used to calculate the amount to be lent and the size of the loan itself, which could vary from a hundred bucks to a hundred million dollars.

Loan Origination is a very vital aspect of the lending process. Based on the customers’ data gathered and analyzed the risks are evaluated, which directly affects the size of the loan if any. The urge to automate the aforementioned operations of loan origination brought to life Loan Origination Software (LOS), which has become a useful instrument to speed up the loan-giving procedure and as a result increased customers’ engagement and satisfaction due to loan cycle automation and the provision of the holistic view of transactions across all the channels. That’s why the LOS market worldwide has drastically grown in recent years and is presumed to grow at a CAGR of 14.7% during the forecast period.

Although loan origination solutions already exist in the market it’s worth thinking about building your own. First of all, in the case of custom development, you don’t have to pay everlasting license and maintenance costs. Secondly, a built solution doesn’t need any additional integrations with your existing software, because it will be developed according to the specific requirements. The only exception here is legacy systems that are simply non-integrable with modern technologies and need revamping. Thirdly, you are the one to choose which features to implement and make the LOS serve your business needs at the utmost.

loan origination software development

Loan Origination Software Benefits

  1. Improved Workflow

Due to the automation of loan origination processes including underwriting, staff collaboration has improved and the rekeying of data has significantly decreased. Also, the automation of high-volume transactions eliminates human error.

  1. Enhanced Customer Experience

Decreased loan-decision time at the stage of credit approval positively affects customer engagement. Users also appreciate the ability to track every step in the loan cycle in real-time, which calls for ultimate transparency across the organization in general.

  1. Mitigated Risks

When it comes to custom loan origination solution development, it is easy to enhance security using end-to-end encryption, access management, user and entity behavior analytics, and other technologies. Moreover, the improved decision-making system minimizes risks aligned with credit scores and reduces the probability of debt collection failure.

  1. Business Growth

Better customer involvement leads to increased ROI, and the optimization of decision-making results in increased profit margins. Also, due to the automated processes, the administrative tasks are reduced which means minimized expenses for the company.

Basic Features of Loan Origination Software

Customer Data Verification

To ensure the best possible customer experience the verification of customers asking for a loan should be simplified and done in an extremely lucid way. For this, we can integrate your solution with digital and centralized state databases which makes KYC and AML procedures done in a jiffy.

Document Management

One of the biggest benefits of LOS is the complete lack of red tape due to the automated management of online applications and customer data. Data can be stored in the cloud and updated in real time. Document management feature also eliminates the need for paper files and reduces the risk of lost or damaged documents. It also provides secure access to loan-related documents, with permissions and access controls that can be configured to meet the needs of different users and departments. AI, ML, and Big Data can speed up and simplify almost all document management activities throughout the loan servicing cycle.

Credit Decision Automation

Deciding on the limit for a customer is crucial to make sure that the loan would be paid back. That’s why we recommend the implementation of automated credit score functionality which allows the upload of previous loan data databases, analysis of nontraditional data from social network profiles, mathematical models building, and the adoption of statistical analysis methods. Deep neural networks embedded in LOS can predict any potential risks and significantly facilitate the decision-making on whether to approve or refuse the loan. To better understand how lenders benefit from modern technologies, check out our case study about an AI-based financial data management platform.

Audit Trail

In lending, an audit trail is a record detailing all the events related to the whole loan servicing cycle. Tracing accounting, trade details, or other financial data to their source can come in handy when the accuracy of an item needs to be verified, i.e. in the case of an audit. A clear, accurate, and consistent audit trail can be a useful tool when it comes to validating and verifying the source of a particular transaction.

Pricing Engine

With a pricing engine feature in your LOS solution, you can provide multiple options to borrowers across a range of possible interest rates and loan programs, helping them target the right loan for their needs. It is an essential feature as it helps to offer more product lines to one client based on their creditworthiness, and when it comes to finances, a more personalized experience can be a decisive factor.

Reporting and Analytics

This feature provides lenders with the information they need to make informed decisions and optimize their loan origination processes. It also helps lenders to monitor loan portfolio risk and to identify potential problems early, reducing the risk of loan defaults and losses. Typically it generates various reports and analytics on loan volume, loan, and performance, but it’s also possible to enable the creation of custom reports tailored to specific needs and requirements. These reports can include information on loan origination activities, loan underwriting practices, and loan performance by region, loan type, or other criteria.

Customer Relationship Management (CRM)

CRM is designed to manage interactions with prospective and current borrowers. It helps lenders to track and manage prospective borrowers who have expressed interest in a loan, as well as to store and manage their contact information. This feature may include capturing lead information, tracking lead status, assigning leads to loan officers for follow-up, etc.

These are the basic features of a loan origination software, however, different systems may include additional features or variations of the above. The specific features and functionality of a loan origination system will vary based on your specific needs and the type of loans you originate.

Any questions? Drop us a line.


Third-Party Integrations

The money lending management is entirely on the financial institution which is giving the loan, although other services could be provided with the help of merging with other ready-made solutions. Here are some best integration options for your loan origination software:

KYC/AML systems, blacklists, debarred companies lists, PEPs lists help to quickly verify customer identity;
• GiniMachine, Experian, SAAS, and FICO are credit scoring solutions providing the best loan options with creditworthy customers and helping to reduce nonperforming loans;
Payment service providers (e.g., PayPal, Stripe, Adyen, and Dwolla) help to pay the loan seamlessly and instantly;
Notification systems integrations help borrowers keep in touch with loan approvals and any money transactions. Moreover, they are also used for promotion alerts, guidelines or loan institution policy change, etc.;
Business intelligence tools like Oracle BI, Dundas, Tableau, and Zoho Analytics are critical to adopt to collect and process large amounts of unstructured data;
Accounting systems integrations help to reduce time-consuming processes by eliminating manual operations of record-keeping and other tasks;
Cloud Data Storage helps to keep LOS scalable and agile. Private cloud provides solid protection of sensitive financial customers’ data and lets lending institutions access it from anywhere anytime.
CRM integration enables you to build connections with your leads and engage with them.


Having a handy loan origination solution embedded into the pipeline of the lending processes is a must to stay afloat in the modern world flooded with savvy fintech solutions. It’s vital to mention that any development company while building custom loan origination software provides its seamless integration with other parts of the system. In case your lending platform is by any chance outdated it should be revamped to comply with cloud-based highly scalable LOS. Find a reliable partner to perform this task effortlessly and cost-efficiently. 

Need loan origination software development services? Contact us to discuss your requirements and find out how we can be of use.

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