Mesopotamian farmers 4,000 years ago would have missed better loan servicing facility that the businesses and individuals enjoy today. 2000BCE is in records when the concept of loans first evolved but lacked the idea of the streamlined servicing process to the borrowers.
Until today, many revolutionary changes have emerged in the lending and financing arena. Big Data has now presented various assorted measures and discern patterns to make you understand that your loan is not at risk, and it is monitored and serviced regularly. Securitization has given rise to a new industry called loan servicing. It means if your loan officer is not available to speak to you, loan servicers are there with lucrative and most promising solutions. They are backed-up by advanced loan servicing software solutions to help in maintaining the creditworthiness of the borrowers.
Interestingly, this article is aimed at helping you to familiarize with the concept of loan servicing and also with some of the top-rated free and open source loan servicing software solutions.
Loan Servicing Software
Finances affect one’s credibility a lot. They will help you build up credit if you successfully make payments. They will hurt your credit rating if you pay late or default on loans. Effective loan serving helps in administering diverse aspects of your mortgages to streamline the timely payment of finances and save you from penalties and over-debts. Recognized loan servicing agencies take the assistance of the advanced loan servicing software solutions to service your loan administration job from the time loan proceedings are dispersed until the loan is paid off.
Nowadays, banks, mortgage organizations, and financial institutions are hiring services from third-party organizations or agencies for loan servicing.
Automation of loan servicing has changed the paradigm in the lending industry. A loan servicing company, servicing firm or a mortgage bank uses such kind of advanced software solutions to collect interest, principal, and escrow payments from their borrowers.
What are the key features of loan servicing software?
It is always advantageous if your loan servicing software offers affordable and comprehensive solutions with a wide range of features. It should necessarily be capable of handling numerous types of loans in addition to being a user-friendly program. Have a look at the listed key elements that come with the loan servicing software;
- Compatible with different versions of Mac and Windows operating systems.
- Free, open-source, or cost-competitive software.
- Secure transfer of existing loans from other servicing systems.
- Able to import one to thousands of loans.
- Exceptional reporting ability.
- Accepts foreign currencies having decimal formats.
- Particular reporter module to develop management reports, invoices, graphics, letters, etc.
- Easy upgrading of files with each version change.
- Investor account tracking.
- Escrow tracking and payment processing.
- Auto-tracking of insurance and tax due dates.
- Unlimited network users.
- Free technical support via Toll-Free phone line.
- Capable of handling multiple separate lenders.
- Print loan coupons and delinquent reminder notices.
- Print amortization schedules with annual total amounts.
- Track loans as active, delinquent, paid in full, etc.
- Password secured system with specific rights to access certain functions.
How is Loan Servicing Fee calculated?
Today, loan servicing has become an industry in itself. Loan servicers are compensated by retaining a relatively small percentage of every periodic payment of a loan that is called as the servicing fee or servicing strip. It usually comes around 0.25% to 0.5% of the periodic payment of the interest amount. Here is a sample;
Loan Servicing Challenges
In a recent research conducted with the loan servicing managers and executives, specific problems and challenges related to the field were discovered and they are as follows;
- The cost of loan servicing dramatically rises due to regulatory compliance instituted after every market fluctuation or any emergency arises such as the great recession impacted years ago.
- Misapplication of loan payments or late fees charged due to alerts received in advance due to manual loan servicing processes.
- Your loan is in default or delinquent and you get charged for default-related services due to unknown or inapplicable reasons.
- Violation of the state and federal laws for debt collection when the loan is in default category and the loan servicer has to take over debt collection responsibilities (with some exceptions).
- Borrowers are not informed through a formal notice of the transfer of servicing rights for their loans.
How beneficial is loan servicing software?
The field of loan servicing is rapidly rising with modern technologies. For example, Wells Fargo, PNC Financial Services, Bank of America, JPMorgan Chase, Ocwen Financial Corporation are some of the established names in the loan servicing industry. They use advanced software systems that can perform Robotic Process Automation (RPA). In the lending environment, RPA has helped many of the lenders and loan servicing agencies to face the industrial challenges. These measures are as follows that actually help them with cutting cost and improving profitability.
Why is Loan Servicing Software needed?
There are distinct advantages of using automated loan processing or servicing software systems. The latest ones are made available based on cloud or web-based technologies. Free and open source loan servicing software solutions bring you some other privileges. They are the automated systems that can be quickly configured, easy-to-implement, and provide a superior customer experience. They help in eliminating paper documents and improve accuracy in decision-making.
Automated loan servicing allows the servicers to evaluate and identify applications that meet the lending criteria quickly.
Seven Crucial Points Supporting the Importance of Loan Servicing System
- Manage credits given by the lending company.
- Track loans based on their different types and access loan servicing information including payment history, escrow and tax information and history, investor reports, and borrower payments.
- Provide a different level of interest methods.
- Handles delinquency and loss mitigation supporting bankruptcy, foreclosure, REO, charge-off, and credit bureau reporting.
- Monitor payment dates with generating month-end summary reports, cut-off reports, investor reports, and year-end reports.
- Calculate and apply late fees to accounts either manually or automatically.
- Support borrower self-service like auto-tracking their loan’s performance.
Loan servicing software is important and can boost your business due to the efficiencies it provides. It is also important to know that not all loan servicing systems are created equally, so you need to choose the best that can fit your organization's needs. Hence you need to make a viable selection based on your specific requirements.
If you are looking for a budget-friendly option, you can consider the below-mentioned list of top-rated free and open source loan servicing software solutions
There is a chart given below to help you to understand about distinct features of these software programs.
Now, let us discuss all of these software solutions in detail.
1. Apache Fineract – (Free and Open Source)
Apache Fineract is a popular open source program for digital financial services and offers an exceptional loan servicing facility with amazing on-premise or cloud-based software programs. It works on all devices with flexible product configuration and comes with the most trusted stable version Fineract 1.x.
(Source: Apache Fineract)
Highlights:
- Fineract 1.x is a responsive platform with open APIs.
- It is easy to develop front-end applications separately and then connected to Fineract1.x.
- The software can be installed on any deployment platform like Windows, Linux, or Mac OS server.
- The system requirements include Java 1.8 or higher, MySQL 5.5 or MySQL 5.6, and Apache ActiveMQ.
- The software is licensed as per Apache License, Version 2.0 that is compatible with version 3 of the GPL.
2. HES Online Lending Software – (Based on Open Source Technologies)
HES Online Lending Software is one of the finest innovations in the field of online lending. The company offers exceptional commercial loan management and servicing software for SME lending. The software comes with cross-device functionality and all-time online/offline access. Although the software is neither free nor open source, the platform is based on open source technologies, which means that the users do not have to pay extra license fees.
(Source: HES Online Lending)
Highlights:
- HES software is based on open source technologies.
- The software empowers financial institutions and banks with the agility of maturity and customization of the HES Core Engine.
- The scalable modular architecture of the software enables accurate and qualitative automated loan servicing.
- GDPR compliancy and AI-powered credit scoring tools add additional functionalities to the software.
3. LendingWise (Free Trial)
LendingwWise is the best loan origination tool and customer relationship management platform. As a prominent loan servicing software, LendingWise incredibly fits the needs of private lenders and commercial brokers. This digital loan management system is also used for construction, flix, flip, bridge, CRE, SBA, and more. LendingWise allows organizations to scale up their business process and enhance borrower engagement. The CRM further helps to improve loan conversions.
The software is customizable for any loan product. You can also compare the best offers from different lenders and investors by visiting a single online marketplace. The tool even provides third-party integrations and a loan payment tracking facility.
The cloud-based software provides a 15-day free trial period with a starting price of $99 per month.
Source: LendingWise
Features
- LendingWise provides a user-friendly interface with customized workflows, seamless loan servicing, and paperless origination.
- This best loan servicing software quickly integrates with the website and other web app forms to collect the critical data.
- This software offers the benefit of real-time team collaboration, enabling you to keep everyone updated and in the same loop.
- The best-in-class tool is aligned with Amazon Web Services (AWS) providing robust security and infrastructure.
- LendingWise also offers additional features such as email marketing, lead tagging, document library with the digital signature facility, and much more.
- The software can also seamlessly sync with other popular tools and applications.
4. Trakker - (Free)
Trakker is a multi-financial services company that offers valuable loan servicing software solution to its clients. The company is headquartered in Florida, and its loan servicing solutions are well-recognized all across the globe. Loan servicing software Version 2.4 is the latest free software tool offered by the company which is a Windows-based program that can easily run on the Mac, Unix, Linux and Windows based operating systems.
(Source: Trakker)
Highlights:
- User-friendly programs supported in an actual Windows 32bit environment.
- Able to import thousands of loan portfolios.
- Unlimited network users are allowed to use the software at once.
- The software is capable of handling more than 9000 separate lenders.
- Track loans as active, delinquent, paid in full, etc.
- Develop and print custom reports for individual payments and annual totals.
5. TheLoanOffice – (Freemium)
TheLoanOffice is a reputed name in the field of loan servicing, and provides an affordable and reliable loan servicing software program to its customers worldwide. It is a web-based software program that is meant to help small businesses in the financial arena.
(Source: TheLoanOffice)
Highlights:
- TheLoanOffice software works on all Microsoft Windows Desktop Operating Systems like Windows 10 Pro (32-bit and 64-bit), Windows 8 Pro (32-bit and 64-bit) and Windows 7 Professional (32-bit and 64-bit).
- The software services all types of loans and users are facilitated to create loan templates for simplifying data entry along and ensuring consistency is loan records.
- The software facilitates the secure processing of reversals, write-downs, NSFs, and payoffs.
- Easy tracking of loan charges and advances, and documentation of detailed recording of payments.
6. TurnkeyLender – (Freemium)
TurnkeyLender offers intelligent lending software with out-of-the-box functionalities. It is a GDPR compliant software system that facilitates automation for efficiency, speed and accuracy. You can request for a free trial of the software through TurnkeyLender website.
(Source: Turnkey-Lender)
Highlights:
- The TurnkeyLender software automatically tracks all interaction between the lender and the borrower, including customer service query and payment history.
- Communication is facilitated through text, SMS, and/or email for payment reminders and account alerts.
- The software automatically updates the credit bureau data of the borrower.
- It is available in both cloud-based and on-premise deployment option.
7. AutoPalSoftware – (Freemium)
AutoPal is yet another well accepted system that is capable of offering exceptional loan servicing software. It is cloud-based software that can run on any system supported by a secure Internet connection, and it is based on the proprietary license.
(Source: AutoPal)
Highlights:
- The AutoPal software offers 100% accurate payoff calculation.
- Custom payment schedules can be set according to the user’s preferences and following the payment cycle.
- Real-time transaction view for up-to-date transactions for scheduled, paid, and forecasted payments.
- The SMS text messaging, email, and automated phone campaigns are facilitated to support the customers.
We have included one more software for discussion. It is a popular loan servicing software-Nortridge.
Nortridge
Nortridge is an excellent software to handle origination and servicing of loans. It also solves your loan management and collections related issues. It is a software that is scalable, and it reduces overhead costs by automation of workflow. Nortridge is useful software for creating new loan products and improving efficiency and decision speed. Its integrated collections module allows for improving loaning practices. It keeps track of the key parameters of the loaning process. It is widely used by Online Lenders, Captive Lenders, Branch-based Lenders, and MarketPlace Lenders.
Highlights:
- Track your business with real-time dashboards.
- Track and leverage loan statistics.
- Highly optimized and highly scalable.
- High-security controls
- Create a fully customized loan origination engine.
- Access current borrower information
- Extensive API with XML import and VBscripting to integrate your loan origination and loan servicing.
- Configure the loan origination process as specified by you.
- Auto-decision making
- Online application
- Automatically generate loan documents,
- Smart disbursement
- Create origination rules for loan officers and branches
- The response of approval or denial in seconds based on loaning rules.
- Generate and store approval letters, legal disclaimers, etc.
- Meet regulatory compliance
LoanDynamix, Margill, GOLDPointSystems, MortgageBuilder, Lending Pro Software, and Loan Servicing Soft are some of the popular options for loan servicing software programs and are readily available to download and use right away.
If you are already using one from the software solutions listed above, you can freely share your reviews here.
Conclusion
There is not just one element to drive financial customer satisfaction, but multiple processes across the entire life of the loan or lease: loan servicing is one of those critical processes that play a significant role to stabilize a borrower’s credit record. Mortgage loan servicing and student-loan servicing are sub-functions that majorly contribute to the loan servicing industry.
A study reveals that the United States of America is expected to have the highest growth rate in loan servicing arena, with revenue of $0.87 billion by 2021. The increasing demand for efficient loan servicing software will help grow the global market at a CAGR of 14.19% by 2021. Demand for the software that can support multiple loans is increasing among end-users to reduce operational costs. AI and machine learning technologies are making lending and processing much easier for lenders. Integrated loan servicing software systems with Big Data analytics is equally contributing to enhance the services to maximize collections and supports the borrowers to reduce delinquencies.
