Loan Management System: How It Works

Loan management system
The Tech trend

Loan management system software is becoming more widely used as digital transformation accelerates. The loan management system software is faster and more efficient than the legacy lending system. It can assist lenders in streamlining and automating loan origination and processing. This post will provide a comprehensive overview of existing loan management system software. Keep reading to learn more!

What is a Loan Management System?

The loan management system is a digital platform that automates every stage of the loan lifecycle, from application to closing. The traditional loan management system process flow is meticulous and time-consuming. It requires the collection and verification of information about applicants, their trustworthiness, and their credibility. 

Also, the process entails calculating interest rates and supervising payments. Loan management system software automates these procedures and provides lenders and borrowers with useful analytics and insights.

What Is Loan Customer Relationship Management (CRM)?

Customer relationship management (CRM) is a technology that allows business owners to manage all of their company’s relationships and interactions with their current and prospective customers. The goal of CRM is to improve business relationships to grow a company. 

It also assists businesses in staying connected to their customers, streamlining processes, and increasing profitability. 

On the other hand, a loan CRM allows you to manage the loans of your company’s current and protective customers. With the loan CRM, you can efficiently improve your business relationships and watch your company grow.

What Loan Management System Software Is Used By Loan Companies?

Loan management system software, also known as loan management software or lending software, automates and manages the entire loan lifecycle. They do this from origination to servicing, processing to collections. 

Loan management system software includes loan refinancing, restructuring, disbursement, credit scoring, and account processing. They eliminate a paper workflow and minimize error and effort when tracking and reconciling loans across enterprises and stockholders. 

Some of the best loan management system software used by loan companies include:

#1. SimpleNexus Mortgage Platform  

SimpleNexus, a nCino Company, is an award-winning developer of mobile-first mortgage technology. It integrates the people, systems, and stages of the mortgage process into a unified, end-to-end solution that includes engagement, origination, closing, and business intelligence. 

High-performing mortgage lenders across the country have adopted its single-platform solution. They use it to improve loan production, lower operational costs, increase referral volume, and improve customer satisfaction.

#2. Sageworks Lending  

Sageworks Lending and Credit software can help you cut loan origination costs and improve lending efficiency. Borrowers want quick responses to loan applications, and loan officers want loans that can withstand loan-review scrutiny.

#3. Floify  

Floify is a mortgage industry automation solution that streamlines the origination of the loan management system process flow. They do this by providing a secure communications and document management portal shared by lenders, borrowers, real estate agents, referral partners, and other loan stakeholders.

#4. Shape Mortgage Software

Top mortgage brokers, loan officers, and lenders use Shape Mortgage Software as their all-in-one mortgage CRM, point-of-sale, and sales/marketing platform. The shape enables you to close more loans with less effort by utilizing over 500+ features designed specifically for the mortgage industry. 

#5. Loansifter  

Loansifter is a powerful product, pricing, and eligibility (PPE) engine that supports best execution searches across 120+ wholesale investors. It can help mortgage brokers win more business. 

The solution can also enable brokers to quickly access best execution product eligibility and pricing for all loan scenarios, with the ability to compare rates from multiple lenders in a single search. 

#6. SoFi  

SoFi is a values-driven company on a mission to assist its members in making sound financial decisions. They create modern financial products and services that assist people in better borrowing, saving, spending, investing, and protecting their money. This allows them to achieve financial independence and realize their dreams, such as owning a home, saving for retirement, paying off student loans, and more.

#7. Total Professional

Total Expert is a leading fintech software company that provides custom CRM and customer engagement solutions for modern financial institutions. To provide a consistent experience across the customer lifecycle, the Total Expert platform integrates data, marketing, sales, and compliance solutions. 

Total Expert converts customer insights into actions to boost loyalty and drive growth for banks, lenders, credit unions, and other financial services companies.

#8. LendingPad  

LendingPad is another modern loan management system software that serves lenders, brokers, bankers, and credit unions. It provides the mortgage industry with centralized, compliant, automated technology that spans the entire lending process while lowering your cost of business.

What Is a Loan Life Cycle?

A loan cycle is when a borrower applies for a loan and when it is paid back to the lender with interest. The typical loan cycle has five stages. Below is how borrowers can manage the processes in each of these stages.

#1. Pre-loan Calculations: 

Before a borrower can apply for a loan, a series of financial calculations must be completed. The first step is to decide what type of loan they want to take out. This will help them narrow down the loan amount. 

The next step is to create a monthly income and expenses chart to determine how much money you can afford to set aside for monthly loan installment payments.

#2. Research: 

As digital lending has expanded its market presence, borrowers now have access to information about a wide range of financial products. They also have easily accessible online tools for comparing various financial products. As a result, borrowers must conduct due diligence to find the best market offer. 

When choosing lower interest rates and being aware of hidden charges such as processing fees and other pre-payment charges, it is critical to be fiercely strategic.

#3. Application: 

Although this step appears self-explanatory, providing incorrect information on documents could delay your loan application by a few days or weeks. When applying for a loan, it is critical to have all supporting documents in order. Banks and digital lenders will use these to assess a borrower’s creditworthiness.

#4. Document verification: 

Each financial institution has its multi-layered verification process, and timelines can range from one week to 15 working days. However, some digital players may only take a few minutes. Only after a lender is completely satisfied with the documentation and paperwork does it proceed to verify a borrower and approve their loan request.

#5. Loan approval and disbursement: 

Once a lender has verified a borrower’s credit score and other paperwork, they proceed to the disbursement process. Here, the loan amount is transferred to the borrower’s bank account according to the agreed-upon terms.

#6. Loan repayment and loan closure: 

Customers must remember to pay their EMIs on time or risk negatively affecting their credit scores. Auto-debit is the most common method of repayment, which can be accomplished through the National Automated Clearing House (NACH) / Electronic Clearing System (ECS). 

Finally, once a loan has been fully repaid, a customer should request confirmation from the lender that the loan has been closed according to their records.

What Is The Main Aim Of Loan Monitoring?

Regular monitoring is carried out to protect the bank’s investment. A good monitoring program will detect any red flags indicating the borrower’s financial health is deteriorating. 

Detecting these early warning signs is critical because it allows the bank to mitigate the increased risk to its investors. At the very least, the lender may want to re-price the loan to account for the increased risk. 

In more severe cases, the bank may wish to recall the loan by, for example, defaulting the borrower and demanding immediate repayment. In either case, if the problem is not identified early enough, the bank’s options for resolving it become more limited.

Banks are also under regulatory pressure to implement strong risk management processes, maintain high underwriting standards, and implement an effective monitoring regime. Regulators are now requesting more data more frequently and more quickly. 

Timely monitoring ensures that the bank is not only meeting regulatory requirements, but is also adequately quantifying its risk, correctly calculating its capital, and setting aside adequate reserves. All of these factors are crucial in the eyes of regulators.

What Is The Online Loan Management System? 

When applying for a loan, you must gather and submit many documents and collateral materials for verification and credibility assessment. Online loan management system software applications allow businesses and individuals to easily fill out and submit applications. They can fill out applications for originating loans. 

The online loan management system software applications also help financial organizations with the verification process. You can use the free online loan management system software applications to fill out your applications.


The market has high expectations for loan products, including quick application processing, flexibility, scalability, enhanced security, and regulatory compliance. A good loan management system, on the other hand, is capable of handling these demands and assisting businesses in meeting their goals.

Loan Management System FAQs

What is the most important aspect of the loan management system software?

The most important aspect of the loan management system software is the analytics and reporting aspect. The reporting module is an essential component of loan management software. 

You can obtain detailed cash flow reports. You can also generate reports based on interactions with a single person or company.

What is the primary purpose of loan monitoring?

The most obvious reason for portfolio monitoring is that banks want to avoid loan losses. Effective borrower monitoring is thus required to identify which loans are likely to become stressed and which loans may default, resulting in financial loss.

What are the similarities between the LOS and LMS?

Legacy loan origination system (LOS) and loan management system (LMS) software are designed to handle specific use cases. They also guide loan origination and management through strict processes that support conventional lending practices.

What is an example of a loan servicing system?

Sending monthly payment statements, collecting monthly payments, keeping records of payments and balances, collecting and paying taxes and insurance (and managing escrow funds), remitting funds to the note holder, and following up on any delinquencies are all part of loan servicing.


Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like