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What makes a great loan software

June 25, 2022

Dara

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Now that you’ve made the decision to become a lender, the next big decision you’ll have to make has to do with the loan software to use. Especially for lending digitally. Whether you decide to build your lending technology yourself or operate off an existing LaaS platform like Lendsqr, here are six things you should keep an eye out for:

Distribution channels

This is perhaps the most obvious thing you’d want to know. How will borrowers access your loans? There’s no business if there’s no system for people to actually get the loans. Borrowers can access loans via mobile app, web app and even USSD. They can also repay via these channels. Lenders are able to reach different groups of borrowers on different channels and you’ll benefit greatly from a loan software like that of Lendsqr that can deliver multiple distribution channels. This is especially important to scale your business.

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Loan decision engine

Decisioning is a crucial part of the loan process. How loan decisions are made, largely determine the success of your lending business. A loan decision engine assesses loan applications based on predefined criteria and rules which make up decision models. The engine is responsible for screening and scoring borrowers’ to determine their eligibility for a loan.

A decision engine can assess thousands of data points at a time. The goal is to have one that runs on robust and extensively configurable decision models. This reduces the burden of manually underwriting each loan and the risk of human error. The decision engine should have multiple modules. This includes a machine learning module. Machine learning allows lenders to improve the underwriting rules based on the data collected.

Disbursement

Disbursing loans after granting them is another stage where your loan software should be up to the task. Every lender needs an organized method of disbursement that is seamless and secure. A wallet system linked to virtual accounts is a great way to do this.

This would require an integration with a virtual accounts provider. It’ll also require a payments provider to transfer the money to the borrower’s actual bank account. The provider will generate a virtual account number for each customer that onboards your platform. This account will be tied to their virtual wallet. Borrowers will store their money in a wallet which is used only for transactions within the platform such as loan disbursement and repayment.

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Automated collections

You’re not making the best use of tech for your lending business if the only way you can only get repaid manually. As a lender, an effective collections system should be top priority for you. This is your bread and butter. Customers have the option of funding their wallets by making a transfer to their virtual account. The system can automatically debit the wallet to repay the loan.

However, this is not the only way. Integrating with a payments provider such as Remita and Paystack allows you to trigger automatic debits from the debit card tied to the borrower’s profile on your platform.

Reporting

Do you know how well or poorly your business is doing? Lending business activities need close monitoring. Some indicators have to be monitored hourly or in real time to ensure everything is on track. Attempting to collate these reports manually is an impossible task.

Your loan software should be able to keep you on top of the affairs of your business at all times. This allows you to course correct wherever necessary.

Blacklist

A system to keep out chronic debtors and fraudsters is important. Equally as important as ensuring an effective collection system. Integrating your loan software with a blacklist service and the credit bureaus is a decision you won’t regret. This gives you even more control over the quality of the borrowers who can access your loans. You also get the chance to report and block the bad guys who somehow snuck onto your platform.

When picking out a loan software, it’s important that all roads point towards profitability, risk management and fraud prevention. We understand that trying to put all these requirements together from scratch can be mind-numbing. That’s why Lendsqr is here to help lenders like you. We’ve done all the work to make you succeed already. Just sign up for free and start lending of Lendsqr’s LaaS platform in minutes.