Step by Step Guide to Automating the Loan Approval Process
Are you still bogged down by manual processes in your loan approval process? If so, you're not alone. But, the good news is, it's time to make a change.
Automating this process is not only necessary for keeping up with the demands of the industry, but it's also a way to improve the accuracy and efficiency of your operations.
And, that's where this guide comes in. I'm here to take you through the steps of automating your loan approval process, from understanding your current process to formalizing policy changes.
By the end of this guide, you'll have a clear roadmap to follow and will be well on your way to a smoother and more efficient loan approval process. So, let's get started!
Step 1: Embarking on the Journey to Automation
As you embark on the journey to automate the credit underwriting process, it's important to understand what credit officers do during the review of a loan application.
A written credit policy may exist, but it's important to acknowledge that it may not reflect the actual process being followed.
Spending time observing the credit officers can reveal informal evaluation steps that are not formalized in the policy.
This information can help identify any gaps in the current system that need to be addressed, avoiding the risk of decline in performance during the automation process.
Step 2: Identifying Key Processes and Checks
On your journey to automate the credit underwriting process, it's essential to identify the key processes and checks that are performed.
To start, focus on the "knock-out" (KO) criteria and automate these checks first. These are the checks that, if not met, immediately disqualify a loan application from further consideration.
Documenting and automating all necessary KO criteria will set you on the path to success.
Step 3: Assessing Data Availability
As you move forward, it's important to assess the availability of data required to implement the practical rules identified in the process.
This includes credit history, income, employment, and other financial information used to evaluate a loan application.
If necessary, take steps to ensure that this data can be collected efficiently.
Step 4: Implementing the Rules
Now it's time to bring the rules to life and automate the credit underwriting process.
This can be done by hard-coding the rules into the loan management system or using a rule engine.
The implementation should be based on the processes and checks identified in step 2 and should ensure that all necessary KO criteria are met.
Step 5: Formalizing Policy Changes and Impact Assessment
As you near the end of your journey, it's essential to formalize the policy change approval process. This will ensure that changes are thoroughly tested before implementation.
Consider monitoring the impact of each change, cross-checking between the expected impact and the real impact, assessing the impact on the approval rate, and assessing the impact on the risk performance.
Why you may not want to automate everything
As you embark on your journey towards automating the loan approval process, it's important to recognize that not everything can be automated immediately.
In the Step 4, after identifying and automating the rules, you may find that certain aspects of the credit underwriting process still need to be done manually. This is okay.
Automation is not a one-time process where everything is automated at once. It's better to approach it step by step, continuously collect data, and automate more over time.
By going step by step, you can ensure that you are making informed decisions and your risk performance does not deteriorate.
