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By CRIF Lending Solutions
Loan origination systems (LOS) often vary in terms of the functional capabilities and benefits they provide. Some are strong in certain areas of lending such as direct or small business; other systems have a more general lending focus. Then, there are those standout systems that are designed and built based on years of knowledge and experience. These systems offer expert lending functionality for many channels.
Indirect lending is showing more momentum than it has in years, and the features and functionality credit unions need are not always included in systems they purchased primarily for other types of lending a few short years ago. As credit unions are taking bigger slices of the indirect lending pie, they are looking to upgrade their systems to increase their financial success.
But what software features do credit unions need to support indirect lending? What functionality will help a credit union succeed in the burgeoning field of indirect lending? The following 10 questions will help credit unions determine whether an LOS solution has the features they need to drive growth in the indirect lending portfolio.
A loan origination system that effectively supports indirect lending should provide a credit union with the ability to originate loans through multiple third-party indirect portals. These web-based portals are essential for effectively targeting the best indirect deals by connecting lenders to the largest network of dealerships. A credit union’s loan software should also communicate all needed details regarding the loan back to the third-party indirect portal.
Look for loan software that allows configuration of the fees paid by the credit union to purchase a vehicle contract from the dealer. This provides flexibility to calculate and pay funds to each dealer by an agreed upon method and value.
This ability allows a credit union to implements its credit policy with a combination of matrices and rules. It also provides auto decisioning and pricing that can be communicated to the borrower, internal end-users, and dealers.
Post-approval loan processing rules are designed to ensure that contracted or accepted application terms are compliant with a credit union’s your policy and match the analyst-approved terms. They also ensure the acceptance of applications that are outside policy is restricted to individuals that have the appropriate authority.
Stipulations are able to be created and configured both globally and individually per product. These are used to record and track various requirements needed to complete an application.
A credit union’s loan software must provide the ability to determine the list and order of steps that the end-user must go through to close an application. This feature provides added flexibility to diversify an institution’s indirect lending portfolio.
This allows the financial institution to select the method that each dealer will use to receive funds. Using ACH allows for automated and faster distributions and transfers of funds.
In the fast-paced environment of indirect lending, dealers need to stay updated at every turn. An LOS platform should allow for daily notification — email or fax — of activities on all loans submitted for each specific dealer or group of dealers.
Being able to store, track, and report on all necessary agreement information between the dealer and credit union is important for effective indirect lending. This includes the fees paid by the financial institution to purchase a vehicle contract from the dealer, contact methods, and other pertinent dealer information.
Credit unions must be able to communicate and update loan and member information to many third-party servicing systems. This communication can be through either real time or batch integration. Once boarded, this information can also be used to create new loans in the future through a CIS lookup.
As a credit union compares LOS platforms, it needs to evaluate the subject matter expertise of the system provider. Look for a well-rounded provider who has know-how in dealer management, underwriting, compliance, and funding — then leverage that expertise to get a leg up on the competition.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
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