Loan Decisioning Software | Stages & Advantages of Automation

loan decisioning software

Banks and credit unions are being forced to adapt the way they make loan decisions as a result of today’s tremendous market demands. To overcome the economic challenges of COVID-19, small and midsized businesses (SMBs) urgently require faster loan decisions. These business owners are used to managing their personal finance online as consumers. When it comes to loan decisioning, they demand the same convenience and responsiveness from their businesses’ financial institutions. Hence, using loan decisioning software is the one-stop solution! Small and midsize lenders must be able to make quick judgments in order to fulfill expanding SMB demand for commercial loans or risk losing these customers to larger, more agile banks. Meanwhile, rising competition is pressuring financial institutions of all sizes to cut expenses and increase efficiency. It’s no surprise that a growing number of small lenders are looking for ways to simplify the loan application process while lowering credit risk.

Stages of Loan Decisioning 

Understanding the fundamental underwriting process, as well as each stage a loan goes through before being accepted or rejected, is the first step toward faster loan approvals. This method can differ from one institution to the next, but it usually goes like this:

  1. Application – A business owner submits an application for a loan and includes all required papers.
  2. Underwriting – The information provided by the potential borrower is checked for correctness, legal standing, and other factors, while their application is assessed to see if they meet the institution’s credit requirements.
  3. Credit decisioning – A selected reviewer will give an official recommendation about whether the application should be approved or denied.
  4. Closing – If the loan is accepted, more documentation is needed and examined before the deal is closed.

While each phase has its own success indicators, automated solutions can assist ensure that nothing is missed by lending teams, allowing business owners to wait no longer than necessary for their loan approval or denial.

Automated Loan Decisioning – Advantages

The process of leveraging technology to speed up loan origination and improve decision-making is known as automated loan decisioning. It’s great for banks and credit unions looking to boost approval rates, cut operational expenses, or do both while maintaining strong risk management requirements.

Consistency is built into automation; every choice is based on the same set of data and reasoning. This means that the approval and denial processes are more impartial, transparent, and free of human bias.

The cost savings alone could be substantial. An automated loan origination system allows more loans to be accepted at a lesser cost than paying a team of underwriters the market rate every time they make a decision.

It’s crucial to note, however, that automating the loan origination process does not imply a reduction in accuracy or risk management criteria. Indeed, by enhancing data quality and minimizing manual errors, automation can assist banks and credit unions in making better judgments.


To compete in today’s digital-first world, you need to offer new products, quick approvals, and a world-class customer experience, as a lender. However, you are aware that loan origination and risk management system frequently obstructs your ability to do so.

You need a system that makes you more competitive, not risk management software that holds you back. You require a solution that promotes corporate expansion. You require a solution that allows you to be more agile.


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