What is Auto Loan?
An auto loan is a loan provided for purchasing a vehicle. Premium auto loan software used by major financial institutions & auto lenders across the world for processing vehicle loans effortlessly. Auto Loan Software is a fully automated solution for auto finance and financial management companies. All the information are provided clearly and easily accessed by using auto loan software. A certain part of the purchase value of the loan is provided as financing. In return, the car owner has to pay back an equated monthly installment every month consisting of the principal plus interest. This is a fully secured loan where the vehicle is considered as collateral. Until the time the loan is not paid fully, the actual ownership of the vehicle belongs to the bank or the NBFC. Once the principle and interest are paid back in full, the ownership gets transferred back to the customer.
What are the advantages of Auto Loan?
The biggest advantage of auto loans is that it has made it possible for people to own a vehicle without actually having the money for it. Vehicles have become affordable helping, thus making life easier for the common people. The amount of financing varies from one financial entity to another. It is usually at about 80 to 85% of the vehicle value. However, this may go up to 90% depending upon the type of entity.
What is the process involved?
Buying a car is no more a luxury in life. It has become more of necessity. However, more often than not, common people find it difficult to purchase a car of their choice by shelling out cash. This is where auto loans come in most handy.
Several aspects are related to an auto loan. Few of them are covered below:
Usually, an auto loan is provided for 3 to 5-years. The borrower can choose the period depending on their comfort level with the EMI amount. However, the longer the period, the more is the interest paid on loan.
Banks and NBFCs are free to choose their interest rate. For banks, RBI declares a base rate below which banks cannot lend. In case of NBFCs, the interest rate is determined by a PLR. A certain portion of the vehicle value is financed in case of an auto loan. This amount varies from one institution to another. It is usually higher in case of NBFCs, who sometimes also include certain other costs like registration, stamp duty, etc.
Repayment of loan:
Like all loans, an auto loan is paid back in equated monthly installments (EMI). Each EMI consists of principal and an interest portion calculated on a reducing balance basis. If EMIs are not paid and reminders are sent. If the outstanding amount is still not paid after that, the vehicle is forfeited.
What are the challenges faced by Financial Institutions?
Auto Loan is a tricky product to handle as the market continues to evolve. So, financial institutions tend to face a lot of operational and profitability challenges everything like the reasons listed below following:
High- Customer Acquisition Cost:
The customer acquisition cost for the auto loan product is high as the terms and documents vary for each vehicle. Amidst the complex nature of the loan product, its scope is bound to differ based on the size of a financial institution, the process they follow, their individual management practice, such scenarios demand an efficient loan review process to ensure profitability.
Financial institutions have to follow a rigorous verification process in order to maximise their return rate and maintain the credit risk factor within an acceptable limit. To take care of this aspect, the lending institutions leverage the help of various third party softwares and credit rating institutions. This lack of a unified lending software may lead to a longer turnaround time of the loan application leading to a higher acquisition cost.
The financial regulations and disclosures keep changing frequently. Hence the documentation process and underwriting process tend to be rather long and tedious. The lending institutions have to dedicate a substantial amount of resources to assure that the loan policies and procedures are followed adequately.
In order to achieve profitably amidst these stringent regulations and challenging circumstances, lenders need to leverage innovative strategies to a fresh look at the borrower’s portfolio for ensuring regulatory compliance while maintaining a good loan performance.
Collection and Portfolio Management:
The existing collection models don’t forecast delinquency or make the traditional collection process lackluster with inefficient mechanisms. Monitoring the productivity and the efficiency of the collection officers becomes a hassle owing to the lack of necessary IT infrastructure which updates the collections immediately.
In order to gain an imperative advantage over the competition and increase the loan portfolio without raising the number of delinquencies, lenders need to go for a custom collection model which would help them to keep track of productivity, improve the overall efficiency and give early warning signals to mitigate losses.
Why CloudBankIN for auto Loan Software?
CloudBankIN is a premium auto loan software used by major lending institutions across the world. It is known for its simple Loan Origination, intuitive credit risk assessment, and innovative collection solutions. CloudBankIN is a unified auto loan software which comes with an in-built accounting and reporting module. Following are the list of features which make CloudBankIN the leading loan product:
- CloudBankIN could be integrated seamlessly with other third-party risk assessment systems or applications like Credit Bureaus, Social Scoring Engines, Security interfaces, Credit Reporting Institutions for comprehensive risk assessment.
- With CloudBankIN lenders could configure users and assign/restrict access to a specific area of loan lifecycle for streamlining workflow, ensuring accountability and improving the loan processing time.
- CloudBankIN makes the data migration from legacy systems an easy process and helps institutions manage multiple loan products and processed within a single platform.
- CloudBankIN multi-lingual and multi-currency compatibility enriches its congeniality make the multi-country implementation easy while ensuring compliance with country-specific conditions.
- CloudBankIN being a unified platform will replicate business-centric changes across all systems injecting agility into the loan lifecycle while considerably cutting down the time and cost factor involved.
- CloudBankIN rule-based engine keeps track of loan performance post-acquisition and its portfolio diagnosis operations decipher the opportunities and potential threats with the help of its trend analysis experiments which take place regularly.
- Our customized reporting module would measure every aspect of the auto loan product from its origination, credit-level, region, borrower profile, to delinquency and non-payment and offer insightful visual analytics to understand the portfolio performance and make intelligent decisions.
Snap out of your traditional approaches and move to a sophisticated data-driven strategy with an end-to-end auto loan software product which manages everything from acquisition to recovery while mitigating risk, lower operational cost, increasing cash flow and keeping up with compliances.