How to Choose the Best Loan Origination System Vendors

If you haven’t evaluated loan origination system (LOS) vendors in more than five years, you’ll find – when you do – that significant changes have taken place. The market is growing rapidly.  A report by Allied Market Research forecasts the global loan origination software industry to reach $12.2 billion, with a compound annual growth rate of 10.2% from 2023 to 2032. The report highlights several factors fueling this growth, including a widespread adoption of artificial intelligence, machine learning, and blockchain technologies, improved customer experience, and other advances in LOS technology.

To remain competitive in the lending industry, you need a modern LOS that benefits both the lender and the borrower. Below, we suggest some important criteria to help you select the best loan origination system vendor for your needs.

We understand the gravity of selecting a LOS vendor. That single, critical decision will affect your lending business for years. We also understand how time-consuming the evaluation can be. The guidance we offer regarding LOS vendor selection criteria is based on the following:

• Decades of expertise in the auto lending industry
• Experience working with partners on complementary lending functionality
• Research and investments in new and proven technologies to make auto lending more efficient and cost-effective
• A customer community that continually provides guidance and feedback about business needs and software functionality

We’ve identified high-level comparison criteria to guide your evaluation process—focus, platform, capabilities, implementation, and trust. We are confident these criteria will support your selection of a loan origination system that improves your loan origination efficiency, lowers processing costs, and helps you comply with changing regulations.

1. Focus

When you need a major home or car repair, you seek someone with recognized experience. The same applies to selecting a loan origination software vendor. Thousands of software vendors offer solutions for almost every business function, but it’s improbable that each of those products is recognized as a market leader. When you look for a vendor exclusively focused on the lending industry, ask these questions:

• Is loan origination software a primary focus?
• What’s the history of your loan origination solution?
• Do your employees—executives, developers, customer support—have experience in the lending industry?
• Do you have a user community and a means for users to ask questions and share information? Do you hold an annual user conference?
• Can you provide credible references for lenders who have similar lending practices?

2. Platform

A cloud-based loan origination system offers many benefits, including:

• Quick implementation and improved productivity.
• Lower startup and operational costs.
• Ease of scalability as your business grows.
• High system availability (99.99% or better).
• Frequent feature updates without burdening your IT team.
• Easy integration with other cloud-based products.
• Stable performance with support for future innovation, like AI and machine learning.

3. Capabilities

Look for a LOS with the right mix of capability and functionality, including:

• No-Code Configurability: Allows you to make changes without coding knowledge.
• User Interface & Dashboards: Customizable displays and menus to improve efficiency.
• Automated Decisions & Smart Queues: Automation that applies consistent credit policies and simplifies compliance.
• Data & Services Integration: Pre-integrated services to streamline access to applicant data.
• Digital Documents: Convert paper documents to digital, saving time and costs.
• Analytics: Measure performance and improve decision-making without needing advanced technical skills.

4. Implementation

A good LOS should not take a long time to set up. Look for systems that offer:

• Quick deployment through cloud-based systems.
• Dedicated specialists to help with implementation.
• Easy configuration to match your specific needs.

5. Other Factors

Consider additional aspects like:

• Community Engagement: Vendors should have active user communities for sharing best practices and offering support.
• Venture Capital Investment: Strong investment banking can be a good sign of stability and growth potential.

Selecting LOS Vendors By Market Share

Checking market share can help identify leading vendors, but be mindful of potential pros and cons. Market leaders might offer more robust solutions, but niche vendors could provide more personalized service.

Focusing on these criteria can help you make a well-informed decision that will benefit your lending operations for years to come.