Retaining your best borrowers and attracting new ones, especially referrals, hinges on how well and how quickly you process loan applications. Potential borrowers won’t wait forever – if processing a loan takes too long, they’ll take their business elsewhere, and your reputation will suffer.
If your reputation is poor, then you don’t grow. If you don’t grow, then your business dies. Your ability to grow is directly tied to how fast you process loans. Processing loans quickly doesn’t mean approving all loan requests, it just means being able to decide if a loan should be approved or not shouldn’t take forever.
So the question is, how do you reduce loan processing time without compromising quality? Many lenders, especially those new to the market, cut corners on due diligence and end up with poorly assessed loans, losses, and even business closure.
You don’t want your loan business to end up in a ditch. So, how do you achieve this magic of swift loan processing without reducing your quality?
Never ask customers information that you don’t really need to make a decision. For example, asking a new customer for a proof of address is sometimes a useless effort. Why? Because when you ask people for proof of address, they provide you with electricity or water bills. You really can’t validate those things, nor do they mean anything.
If the borrower defaults, the money you’d spend trying to find them would be all for nothing. Instead of hard-to-verify proof of address like utility bills, invest in robust KYC (Know Your Customer) technology, liveness checks, and verifying other important details that prove your borrower is legitimate.
Be transparent upfront
Inform potential customers of all the information they would need to process a loan application before they start. This prevents applicants from having to stop mid-process to gather missing documents, which can lead to frustration and delays.
Automate approvals for established customers
For your first time customers, it’s okay to perform offline or secondary verification. But, once the customers have established themselves, you can automatically approve their loan subject to making sure that automatic approval and disbursement is within an amount you are at least a bit comfortable with.
So for example, a new customer comes to you, borrows #50,000, repays, then comes again to borrow another #50,000, you can automatically disburse. Or your policy could be they have to borrow the same amount twice for an automatic approval.
But, if the customer returns with a #250,000 loan request, then that’s out of the ballpark. You may want to call them to confirm their identity. Make sure to communicate the process from manual approver to automatic approver to your returning customers.
Manage your customers expectations
When manually reviewing and approving a loan, send an email notification that informs your customer exactly how long the verification process will take. Then, make sure you stick to this timeline rigorously.
Schedule dedicated times throughout the day to review applications – hourly for full-time lenders, at least three times a day for part-time operations. Consider weekend reviews to prevent backlogs. Combining all these methods will greatly reduce loan processing time for you.
Open communication opportunities
When you need verification, let customers know right away and offer them the option to call you at their convenience to complete the process quickly.
Your customers will love you for short loan processing times
Delays only frustrate your customers, driving them to competitors and damaging your chances for those valuable referrals. On the other hand, cutting corners to satisfy customers at all cost and reduce loan processing time will only harm your business.
The key is in finding the balance and using the right strategies we shared. Not only will you gain a competitive edge with faster turnaround times, but you’ll build a reputation for exceptional customer service that will attract more borrowers.
If you are a Lendsqr lender, you can completely automate your loans when configuring them. Customers will make requests, the system does robust risk control checks, and disbursement done to any bank account all within seconds. But if you are worried about risks, you can even decide that some loans above certain thresholds or from new customers should go to your risk officers for manual reviews.
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October 22, 2024
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