A Comprehensive Guide to Loan Management System Workflows

Bob Schulte
Apr 24, 2024
8 mins read
A Comprehensive Guide to Loan Management System Workflows

The success of lending institutions is now based on offering the best rates or the most attractive terms. You need to master the art of efficient loan management, ensuring every intricate detail is accurate and updated in a timely manner without spending hours at a stretch. 

This is where a loan management system jumps to your rescue. Think of it as the control center for your lending operations, orchestrating every aspect of the loan lifecycle after origination with accuracy and intelligence. This is precisely the reason behind its growing adoption. 

💡Did you know that the global loan management software market is expected to reach above $25 billion? [Source] That’s right! It is expected to grow at a whopping CAGR of about 18%.


Now, more than simply having a robust loan management system is required. You must understand its workflow to unravel how to utilize it effectively. Whether you are a private lending institution, CDFI or NBFI, this guide will equip you with the knowledge to transform your loan processes with the help of a loan management software.

So, let’s ditch those spreadsheets and outdated systems and harness the power of strategic loan management!

What a Loan Management System Includes: The Core Workflows

A Loan Management System encompasses a suite of core workflows that streamline the lending process. These workflows are the backbone of efficient lending operations, providing lenders with the tools and capabilities needed to manage loans effectively and mitigate risks. Let’s understand them: 

  • Loan Servicing

Loan servicing refers to the ongoing management and maintenance of loans once they have been originated. A loan management software provides automated loan servicing features and tools to manage this phase better. This includes:

  • Loan Tracking: Loan tracking monitors and tracks the status and details of individual loans throughout their lifecycle. It typically includes loan status updates, comprehensive loan details, loan history, dashboard view, etc.

  • Payment Processing: Automating the collection, processing, and posting of loan payments from borrowers.

  • Account Maintenance: Managing borrower accounts, updating information, and handling changes to loan terms, such as payment adjustments or modifications.

  • Interest Accrual: Calculating and accruing interest on outstanding loan balances over time.This also includes standard accrual methods like 30/360, Actual/365, Actual/360. LMS can also support variations of the standard methods by using combinations of Payment Frequency, Per Diem, and Interest Day-Count.

  • Automated Late Fee Calculation: Automates your late fee calculation based on principal, entire payment, or both principal and interest. It also posts the late fee on the borrower’s portal without needing any adjustment.

  • Workflow Automation Throughout the Loan Lifecycle

LMS automates various business processes, not just loan servicing. This includes automating repetitive tasks, reducing manual intervention, and improving operational efficiency. 

With workflow automation, you can maximize your team’s productivity and focus on high-value loan activities. Features like cross-departmental workflow management allow your organization to share borrower information securely. 

Additionally, features like dynamic widgets pull all borrower information in one place, and Asset & Insurance Tracking helps manage borrowers and collaterals, thus reducing risk.

  • Contact Relationship Management (CRM)

Contact Relationship Management (CRM) functionality helps lenders manage interactions and relationships with borrowers throughout the lending lifecycle. This includes:

  • Contact Management: Storing and organizing borrower information, including contact details, communication history, and preferences.

  • Communication Tracking: Logging and tracking interactions with borrowers, including phone calls, emails, meetings, and notes.

  • Lead Management: Managing leads and prospects, tracking their progress through the loan origination process, and nurturing relationships.

  • Follow-up Automation: Automating follow-up communications and tasks based on predefined triggers or events, such as loan application status updates or milestone achievements.

  • Reporting and Analytics: Providing insights into borrower behavior, preferences, and satisfaction levels to improve customer engagement and retention.
  • Custom Reporting and Analytics

Creating custom reports is a matter of seconds with a Loan Management System. These systems have advanced report-writing capabilities that can generate highly customized and professional reports. 

You will also get actionable insights into all your loans quickly. The LMS can effectively analyze your loan servicing data and loan portfolio to help you make data driven decisions for your future lending strategies. 

Expert Tip!

A Loan Management System equipped with custom 1098 and 1099 tax reports generation can be a game-changer. You can batch-create 1098s for all the borrowers and 1099s for all the lenders.

These systems also offer IRS fire file creation, where you can create your annual IRS reports within the system with automation. 

This saves time, enhances accuracy in filing, and ensures compliance with IRS regulations.
  • Document Creation and Management

A Loan Management System also provides efficient document management features, providing centralized storage for all loan and borrower related documents. 

This helps in securely storing, organizing and retrieving these documents and files whenever needed. This feature is especially beneficial with cloud-based platforms so that you and your team members can access loan documents from anywhere. 

The system is equipped with document templates that can be used wherever applicable. It automates document creation utilizing the pre-built templates and customizes those documents using the borrower data. You can create introductory loan documents, including Welcome Letters, Promissory Notes, Amortization Schedules, ACH Authorization, Truth-in-Lending, and so much more.

With document management, you can also ensure compliance and facilitate effective communication with borrowers.

Importance of a Loan Management System in a Loan Lifecycle

A Loan Management System has become a game-changer. The tools and features within the system empower lenders to navigate the entire loan lifecycle with a strategic advantage. Here are the key reasons that highlight its importance:

  • Effortless Loan Servicing: Managing repayments, generating statements, and handling delinquencies can be a logistical nightmare. An LMS automates these tasks, freeing up staff for more strategic activities. Borrowers benefit from transparent communication and timely updates on their loan status.

  • Proactive Delinquency Management: Early intervention is key to minimizing losses. An LMS identifies potential delinquencies early on and triggers automated communication with borrowers. This allows for prompt action and helps prevent defaults before they snowball.

  • Data-driven Decision Making: An LMS is a treasure trove of valuable data. Comprehensive reports and insightful analytics empower lenders to optimize loan products, pricing strategies, and risk management practices. This data-driven approach leads to informed decision-making and improved portfolio performance.

  • Improved Customer Experience: Typically, an LMS has a user-friendly borrower portal that provides all data related to the borrower and the loan. This allows them to access their sensitive financial data securely. Also, with automated document management, CRM and custom reports, borrower experience is enhanced.

  • Enhanced Regulatory Compliance: LMS features like audit trails and automated reporting help lenders comply with evolving regulations.

  • Scalability and Growth: An LMS can adapt to your growing loan portfolio, providing the flexibility to handle increasing volume and complexity.

5 Best Practices for Maintaining Effective Loan Management System Workflows

1. Continuous Monitoring and Evaluation:
  • Performance Metrics: Monitor key performance indicators (KPIs) like processing times, error rates, and delinquency rates to assess workflow effectiveness.

  • User Feedback: Gather feedback from staff and borrowers to identify areas for improvement in the user experience and overall workflow efficiency.
2. Ongoing Process Improvement:
  • Automation Opportunities: Continuously identify repetitive tasks that can be automated within the LMS to further streamline workflows and free up staff time for more strategic activities.

  • Workflow Optimization: Analyze your existing workflows and identify areas where processes can be simplified or restructured for improved efficiency.
3. User Adoption and Training:
  • Comprehensive Training: Provide comprehensive training to staff on the LMS functionalities and updated workflows to ensure user proficiency and consistent application of procedures.

  • User-friendly Interface: Choose an LMS with a user-friendly interface that is intuitive and easy for both staff and borrowers to navigate.

  • Ongoing Support: Offer ongoing support resources such as user manuals, tutorials, and readily available help desks. This helps in addressing user queries promptly and encourages adoption.
4. Integration and Data Management:
  • Seamless Integration: Ensure your LMS integrates smoothly with existing systems like accounting software for efficient data exchange and streamlined workflows.

  • Data Quality Management: Maintain strict data quality control procedures to minimize errors and ensure data accuracy throughout the loan lifecycle.
5. Security and Regulatory Compliance:
  • Compliance Updates: Stay informed about evolving regulations and ensure your LMS functionalities and workflows adhere to the latest compliance requirement

  • User Access Controls: Implement appropriate user access controls within the LMS to restrict access to sensitive data. Ensure the platform offers security features like access controls based on user roles and responsibilities.

How Bryt Loan Management System Optimizes Loan Workflows

With the lending industry becoming more complex, a Loan Management System is a vital tool to use. And Bryt Software can be your trusted partner here. It is a cloud-based Loan Management System that is built with advanced automation tools. Here are our most attractive features:

  • Effortless loan servicing: Automate loan servicing and management processes ensuring personalization for every borrower.

  • Seamless workflow automation: Enhance operational efficiency with this end-to-end automated loan processing software. Onboard more loans and ensure 100% accuracy in every data, no matter the loan volume.

  • Unified dashboard for easy management: Gain instant insights into your entire loan portfolio with Bryt’s centralized dashboard. Track key metrics, identify trends, and make data-driven decisions, all from a single, user-friendly platform.

  • Contact Relationship Management: Bryt’s built-in CRM fosters strong borrower relationships. Manage communication, track interactions, and ensure a personalized lending experience for every borrower.

  • User-friendly borrower portal: Empower your borrowers with a secure online portal. Borrowers can conveniently access loan information, submit documents, and manage their repayments, all at their fingertips.

  • Highly tailored reports: Bryt empowers informed decision-making with customizable reports. Generate reports specific to your needs, analyze trends, and gain valuable insights into your loan performance.

  • Built on Microsoft Azure: Bryt leverages the robust security and scalability of Microsoft Azure. Enjoy peace of mind knowing your data is unbreachable and your lending operation can grow seamlessly.

Ready to streamline your workflows, improve the borrower experience, and unlock the full potential of your lending business? Request a free demo today!

Bob Schulte

About Bob Schulte
Bob Schulte, CEO, Bryt Software is the visionary leader behind Bryt’s groundbreaking approach to loan management. With 30+ years of experience in the SaaS industry and an impressive 25 experience years of education, Bob brings diverse SaaS expertise to the table. He is known for his innovative approaches and commitment...

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