A process by which a debtor applies for a loan and the banker pays out it or rejects the application due to some issues is known as loan origination. Every step from application to funding payouts or rejects of the application is included in this origination process. So, all the systems of managing and automating the loan application and payouts processes are called the loan origination system.
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The origination process differs, and they depend on the types of loans as we know that personal loans are different from mortgage loans. The loan servicing takes place after the loan organization. All the procedures until the debtor repay the amount of loan completely the servicing part includes in it. In between various financial organizations, the loan origination process can vary. It may happen through various channels and meetings with the internet. This process needs a lot of documentation. Generally, it takes 35 to 40 days. However, it can be faster and easier with the higher use of automated systems.
What Are The Stages Of Loan Origination
Over various stages, loan origination takes place. One of the important origination stages is providing a better customer experience. Also, it varies from lender to lender. However, some of the important steps that are the same are as follows.
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Pre- Screening
Pre-screening is also known as pre-qualification, and it is the first stage of the loan origination. In this step, the lender checks the debtor’s eligibility for a loan that a borrower wants, and a lender examines the authenticity of the bankruptcy. The mortgager must submit their proof of identity to the banker to get the loan. The documents include:
- A government-issued ID card like a passport
- Income certificate
- Credit score
- Statement of bank and previous loan
When the debtor submits all these documents, then the banker verifies them. The banker may substantiate these documents manually or with loan origination software. After the verification process, the banker allows the debtor to proceed with the application process.
Application
The borrower provides all the relevant information to get a loan in this process. The banker takes all the information in detail from the debtor, and if the loan is related to the business, they proceed with processing the business loan underwriting process.
Credit decision
After the underwriting process, the next step comes the credit decision. The application will be approved or rejected at this stage; the lender decides everything. For the bankers, the loan origination systems can make this decision.
Quality check
Quality checking is the final step of the loan origination process. The business of lending is highly regulated. The lending origination must check all the processes, make sure they are error-free, and comply before funding. The lending origination verifies the application.
Funding
When all the documents are signed and verified, the banker makes the funds available. Some of the application loan forms need more steps. These steps include loans against the business or property loans.
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