Insights

The lending landscape is rapidly evolving in today’s digital era, where borrowers demand instant, seamless digital experiences. Moreover, intensified competition compels lenders and lending institutions to assess loan applications swiftly and accurately. Fortunately, the evolution of credit decision engines provides lenders with a transformative solution, enabling them to make informed lending decisions in real time. To grasp this concept better, let’s delve into the loan processing workflow from the lender’s perspective.

What happens after you submit a credit request (loan) application?
Credit Request Scrutiny– The loan application process involves an initial review to ensure all necessary information is provided and eligibility criteria are met. Documentation verification is then conducted, including identification, income proof, employment details, and bank statements. Creditworthiness assessment involves evaluating factors such as credit score, debt-to-income ratio, and financial obligations. Risk analysis is then conducted to assess the loan’s viability and ensure alignment with risk management policies. Subsequently, a decision-making team evaluates the application, considering all relevant information. Once a decision is reached, it is communicated to the applicant, along with the terms and conditions if approved. It’s important to note that the process may vary in complexity and adhere to internal procedures.

How has technology streamlined the complex, time-consuming lending process and made it efficient?
Today’s credit decision engine leverages advanced data analytics and machine learning algorithms to automate and expedite the evaluation of loan applications. By harnessing the power of this technology, lending companies aim to provide faster, more accurate, and efficient credit decision-making experience.

Credit decision engines streamline the credit application process by integrating with various data sources for automated data analysis, real-time decision-making, enhanced risk management, and customizable solutions. It evaluates factors like credit score, credit history, income, employment status, and debt-to-income ratio, reducing waiting times and improving operational efficiency. The system also incorporates advanced algorithms for risk assessment, ensuring compliance with regulatory requirements and informed lending decisions. This technology is highly customizable to fit specific business needs.

What are credit decision engines?
Credit decision engines are automated systems that use data analytics and machine learning algorithms to assess a borrower’s creditworthiness. They evaluate factors like credit score, history, income, employment status, and debt-to-income ratio. This comprehensive evaluation determines the probability of default, enabling lenders to make accurate lending decisions. These systems have revolutionized the lending landscape by enabling lenders to make informed decisions based on multiple credit factors. While it is important to note that credit decision engines are distinct from credit score factoring systems.

Why are they important?
Decision engines play a crucial role in the origination process of Credit requests. Be it a Secure (collateral involved such as Home Loan, Automobile Loan) or Unsecure (such as Credit Cards, Personal Loan) lending – all pass through a decision engine.

A decision engine, when plugged in seamlessly with the third-party data providers, enables an automatic retrieval of essential information required for underwriting. This includes credit scores, employment verification, bank statements, tax returns, and other relevant data, and may also extract data from scanned documents.

The collected data automatically executes business rules, generates credit/risk modeling, and offers and may also compute data required for underwriting processes such as cash flow analysis and debt-to-income ratios.

How do they work?

• Decision Engines may call external services via APIs to execute the various defined Business rules.
• Collaborate with multiple third-party data providers to validate application data.
• Accommodate unique credit models for each loan product.
• Generate one or multiple offers for selected products.

What are the business rules (engine)?
Business rules serve as the compass for decision engines, providing criteria and guidelines that govern their operations. These rules act as a set of instructions, specifying the conditions under which particular decisions should be made. They can be triggered automatically based on predefined data parameters or manually initiated when specific events occur. By ensuring consistency and efficiency in the loan origination process, these rules enable both automated and human-guided decision pathways, tailored to the circumstances and requirements of each loan application. Ranging from simple criteria like ‘age over 21’ to complex evaluations such as a ‘credit score exceeding 750’, business rules adapt to the intricacies of decision-making.

How can we help?
ThoughtFocus has strong expertise in offering Lending solutions to various lending companies and large financial organizations. Our team at ThoughtFocus possesses strong domain and technical expertise and is ready to offer comprehensive support in designing, developing, and implementing an innovative credit decision engine that best suits your business needs. Our smart accelerators speed up the delivery of solutions and help meet your go-to-market goals. Whether you represent a financial institution or a lending organization, we are dedicated to understanding your unique business requirements and objectives in the realm of credit decision-making. Reach our team of Lending solutions experts for more information at betterfuturefaster@thoughtfocus.com.