The lending process may seem simple on the surface - a borrower requests a
loan, undergoes verification, receives approval from the lender and then
repay the principal amount along with interest. However, in large financial
institutions with numerous entries and active loans, streamlining the
process can become cumbersome. That's where Loan Origination Systems (LOS)
come in - by digitizing the lending process, borrowers can be easily
onboarded, undergo KYC and underwriting, and generate and accept offers.
This saves time and resources by reducing the need for manual paperwork and
However, while LOS helps streamline loan applications, something is needed
to manage the entire process from fund dispersion to amortization and
repayment. Without a cloud-based Loan Management System (LMS), it can be
chaotic to manage everything manually. An LMS can help manage the entire
process, allowing for smoother operations and better tracking of loan
What is Loan Management System (LMS)?
Let's say you are a teacher who needs to manage a class project and
you might use a system to keep track of which students have chosen
which topic, how much time each student has to work on their
project, and when each part of the project is due. You might also
need to communicate with students to provide feedback and guidance
and ensure that the project is completed on time and within budget.
In this case, the Loan Management System would be the software and
processes you use to manage the entire project lifecycle, from
initial planning to final submission. It would include features such
as tracking of project status and progress, and communication tools
to keep students and other stakeholders informed.
Similarly, A loan management system is a platform that enables
lenders to manage their loan portfolios and automate the loan
servicing process. It includes a range of features such as loan
approval and disbursement, repayment schedules, and tracking of loan
payments and balances. The system also provides reporting and
analytics capabilities that enable lenders to monitor and analyse
the performance of their loan portfolios, identify trends, and make
data-driven decisions. Overall, a loan management system helps
lenders to streamline their operations, reduce costs, and improve
the customer experience.
Features of a Loan Management system:
- Loan Application Management: The LMS helps lender to
streamline and automate the loan approval process based on their
criteria. It allows lenders to easily review and analyze the
borrower's financial information, which helps them make informed
decisions on loan approvals or rejections.
Loan Disbursement Management: Once the loan has been
approved, it's time to get the funds to the borrower. The loan
management system manages the entire disbursement process, which
includes verifying the applicant's information and then transferring
the funds. This is where the borrower finally gets to breathe a sigh
of relief and say, "I got the loan!
Amortization: It's basically a way of paying off a loan over
time through regular payments. Each payment goes towards both the
principal amount borrowed and the interest charged on that amount.
As the borrower makes these payments, the amount going towards the
principal gradually increases while the amount going towards
interest decreases. LMS creates a super-organized table that
outlines the specific amounts and timing of each payment. This way,
you can see exactly how much debt is paid off each time.
Loan Payment Management: Ah, the joy of paying back loans!
Well, maybe not, but it's an essential part of the loan management
process. LMS manages loan payments, which includes tracking them,
generating invoices, and sending reminders to borrowers when their
payment is due. Our LMS also offer multiple payment methods like
Stripe and account-to-account payment providers like Modern
treasury. This ensures that borrowers can make payments in a way
that's convenient for them.
Interest Calculation: Interest is the cost of borrowing
money, and it's an essential component of any loan. LMS also
calculates interest based on the loan amount, interest rate, and
repayment period and commits zero errors. This ensures that both the
borrower and the lender are on the same page regarding the cost of
Differing Payment Management: Sometimes, borrowers might want
to pay off their loan early or make extra payments. The loan
management system allows for differing payments, such as providing
the option to make extra payments to pay off the loan early or ask
for an extension for a particular payment. This ensures that
borrowers have some flexibility in how they repay their loans.
Reports and Analysis: The loan management system generates
reports on loan applications, disbursements, payments, etc. This
allows lenders to stay on top of their loan portfolio and make
Customer Relationship Management: The loan management system
allows the management of customer information, including
communication with borrowers and tracking of interactions. This
ensures that lenders can build a relationship with their borrowers
and provide them with a high level of service.
Loan Portfolio Management: Managing a portfolio of loans can
be a daunting task. The loan management system assists with the
management of the loan portfolio, including tracking loan
performance, delinquencies, and defaults. This ensures that lenders
can monitor their loan portfolio and take corrective action if
Why does every lender need an LMS?
Time-saving: LMS saves lenders time by automating many of the
loan management processes. For example, loan applications can be
submitted online, and the system can automatically process the
application, verify credit scores, and approve or reject the loan.
Furthermore, it effectively manages all the loans portfolio under a
single interface until the loan is repaid. This saves lenders from
having to manually review and manage each loan application, which
can be time-consuming.
Easy Access: LMS provides lenders with easy access to loan
information from anywhere, at any time. This allows lenders to
manage their loan portfolio and respond to customer inquiries
quickly and efficiently, without the need for physical documents.
Centralized Data: LMS centralizes loan data, providing
lenders with a single source of truth for all loan-related
information. This makes it easier to manage and analyse loan data,
generate reports, and identify trends and patterns that can inform
Flexibility: LMS can be customized to suit the needs of
different types of lenders like banks, NBFC etc and different
sectors of lending like automobile, healthcare etc. This makes it a
flexible solution that can be tailored to meet the specific
requirements of each lender.
No errors: The process of manually computing loan interest
rates for each loan application can be overwhelming and prone to
errors due to human fallibility. However, utilizing software such as
LMS streamlines the process and conducts all computations and data
analysis without any mistakes.
Systematic repayment process: LMS provides lenders with a
streamlined repayment process that automates payment reminders,
generates payment schedules, and tracks borrower payments, ensuring
timely payments and reducing the risk of default. There is no worry
about making calculation mistakes or tracking payment schedules, LMS
solves it all.
The financial market today requires credit products that can cater to
various demands such as quick loan processing, flexible and scalable options
for both lenders and borrowers, as well as robust cybersecurity and
compliance measures. Digital loans are becoming increasingly popular, and a
high-quality Loan Management System can handle these requirements, providing
a positive lending experience and customer-centric platforms that businesses
are seeking. Incorporating professional Loan Management Software in their
business strategy can enable companies to target new generations of
customers while streamlining their workflows.
Theecode offers the industry-leading Loan Management Solution, providing a
suite of Lending Solutions that meet various needs for your specific
vertical of lending be it automobiles, home improvement or healthcare.
Theecode currently works with, different Financial Institutions, lenders and
dealers worldwide, ensuring access to the best-in-class solutions for