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Improving the Loan Process: What Should Financial Institutions Know?

January 17, 2018


Based on the current increase of lending/borrowing practices from all financial institutions, it has been noted that there has to be an effective loan review system. This system is meant to promptly identify loans that have a potential credit weakness, find trends that affect the collectability of a portfolio and assign risk grades on the basis of quantitative data. According to the Federal Reserve Bank, it is important to execute a periodic review with regards to the commercial borrowing relationships. Furthermore, a financial institution has to receive all the latest personal and business financial information.


The process of collection could be constituted as well as documented using software solutions that outline the responsibilities, records the receipt dates and tracks activities. If a borrower fails to offer the updated financial records it may show that they are undergoing financial difficulties. Hence, it is important to quickly examine which borrowers possess overdue documents as a form of risk management.


According to Nyantakyi and Sy[1], loan review is one of the biggest challenges facing financial institutions because it is their responsibility to get updated financial information from the customers; this helps to execute annual reviews. An annual workflow procedure along with effective financial analysis system offers essential building blocks for the compliance with regulatory directives. For instance, if the loan procedure is diligent when it comes to tracking and uploading financial information, it would notify another loan provider to analyze a borrower and the risk would already be graded.


Software solutions like Tera CMS, Tera Intelligence and Tera Collect are meant to offer a systematic, centralized system that can replace traditional communication processes. Additionally, managing the loan process through relevant software solutions may lead to access of status reports that indicate the specific loan processing stage that the application is in as well as the percentage of completion.  





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