Loan origination system- Types, Tools and Guidelines

September 02, 2022 Admin
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A Loan Origination System (LOS) software is used for processing loan applications and administering end-to-end loan transactions. The system may include various tools like pricing and eligibility engines, document management and compliance tools. The current lending ecosystem functions on a hybrid borrowing model, which includes elements to improve client engagement and happiness. To increase efficiency and profitability in such a setting, a suitable LOS must be installed. This blog will help you under the nature and functionality of a Loan Origination Software.

The Loan Origination Software automates various stages of the origination lifecycle and aids in speedy loan approvals, making the entire process much more convenient for clients.

An LOS manages the loan origination and completion process, as well as the pricing and criteria for each loan, along with the papers needed for underwriting and closing. It also serves as an interface between third-party systems for data/document interchange and compliance vendors to assure compliance. 

With the advent of cloud-based Loan Origination Software, lenders were able to discard legacy solutions for enrolment, which contributed significantly to the loss of leads and, as a result, revenue loss. Before selecting a Loan Origination System, one must consider the needs an institution might have. Below we have discussed in detail the need for an Loan Origination System


Creating a Centralized Database

Banks deal with a wide spectrum of data, including client data (demographics, market data, banking history, etc.), relationship data (subsidiary, Holdco, parent/child, spouse, etc.), collaterals (kind, value, insurance, etc.), and financial data (limit, balance sheet, P & L, Ratios, etc). LOS accelerates credit decisions by working towards developing a centralized database for banks, allowing them to abandon the archaic practice of data storage on paper. The Loan Origination System presents data to the bank's designated officers in a way that promotes efficiency and high production. In addition to centralizing data, an end-to-end approach guarantees that the bank's credit policies are adhered to during the loan evaluation process.


360 degree credit risk management 

By utilizing end-to-end risk management tools, Loan Origination Software regulates and mitigates the risk inherent in the credit lending process. It protects banks from borrowers with a chequered credit history, fosters prudent lending decisions, and increases profitability. Furthermore, they allow lenders to balance credit risk with lending pace, quantity, and quality, outperforming competitors.

One should look for the following risk management abilities in an Loan Origination System. 

  • Workflow management
  • Records management
  • Notes and relationship management
  • Adhering to the bank’s credit policies
  • Account aggregation
  • A diverse set of risk-rating models
  • Portfolio management, including concentration analysis, exposure analysis, and volume analysis, among other things.


Omnichannel Forum

Current market trends demand Loan Origination Software that can easily link to any given digital self-service channel via an integrated, omnichannel digital banking forum. 

A digital loan origination solution, whether self-service or guided, includes several features such as:


  • Intuitive interfaces with reduced need for data entry
  • Smart data collection via OCR for fast and secure scanning and uploading of documents
  • Loan status information in real-time for both customers and bank staff along with automated notifications
  • Opportunity to integrate video calls with bank officials during the loan application process
  • ID verification and authentication tools via fingerprint and facial recognition, and many more.

One stop for all loan types

An LOS is able to meet a bank's demand for various types of credits -- mortgage, consumer credit, trade credit, corporate and MSMEs credit. Such a system contributes to significant cost reductions; furthermore, a centralized system provides an in-depth perspective on clients, facilitating up-sell/cross-sell opportunities and driving customer happiness and retention.


Advanced approach for financial analysis

The loan origination system is data-driven and has analytical capabilities that lend banks important insights into credit decisions. Through comprehensive financial statement analysis, a LOS allows for controlling credit risk.

Configurable financial ratios, peer group comparisons, projections, and other features can aid in the creation of successful customer risk ratings, predictions, and consolidations.

Key features of LOS that allow you to grasp the enormous potential of data include:

  • Financial spreading (ratio)
  • Peer group analysis
  • Financial covenants tracking and financial projections
  • Advanced credit memos 
  • Effortless report creation without the need of database expertise
  • Automatic generation of periodic reports
  • Portfolio oversight to see the big picture and to outline and understand trends.


Banks require a well-thought-out integration strategy that boosts lending processes, facilitates loan automation, and improves consumer convenience. ScoreMe has created an end-to-end cloud-based loan origination system for banks, non-bank financial institutions, and other institutional lenders. The platform leverages cutting-edge technology to help originate loans and is powered by ScoreMe APIs for establishing loan eligibility through financial statement analysis. 

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