Loan Processing: What It Looks Like for Dealers & Lenders
As any loan processor may tell you, processing a loan application is, to put it lightly, an extremely thorough process with specific requirements and deadlines to keep up with. Much like a loan process at a bank, a third-party loan process works in a similar manner, with multiple rounds of verification, appraisals, and reviews. In this guide, we’ll provide a general overview of the steps that go into loan processing and what the process looks like at Web Finance Direct for both dealers and lenders.
What Is Loan Processing?
Loan processing is the review process of a loan application. This standard procedure allows a loan processor to assess whether a borrower is an asset or a risk to a lender. The loan processor is responsible for ensuring the loan application is accurate and complete before sending it to an underwriter. They gather and review all necessary documentation, including credit reports, proof of employment, and income and assets verification.
If any information is missing from the loan application, the loan processor alerts the applicant and reaches out to any third parties necessary for obtaining the missing information (appraisers, insurance companies, employers, etc.).
How Does Loan Processing Work?
Loan processing may vary based on employer or state and local laws, as well as if the loan application goes through a bank or credit union versus an indirect loan processor. In general, processing a loan application involves the following steps.
Open and Review the Loan
The first step of loan processing is for a loan processor to open and review the application. Oftentimes, they work with a loan officer to address any initial concerns or questions while processing the loan application. The loan processor should ensure they understand the application in its entirety before moving forward and address any concerns as soon as possible to keep the process moving smoothly.
Enter Loan Information Into a Computer System
Loan processing is a very tedious and deadline-sensitive process, so most companies have a system or proprietary software they use for entering information accurately and on time. The computer system will set due date reminders for when different steps need to be completed and help keep track of any missing information in the loan application.
Order a Credit Report
Oftentimes when processing a loan application, the borrower’s credit report may already be included in the application file when it’s presented to a loan processor. It’s the loan processor’s job to ensure the credit report is included in the application. If not, they should double-check that the application includes consent to pull a credit report and then order a credit report of the borrower.
Verify Title Information
Obtaining a Verification of Title (VOT) is especially important when processing a loan request for a car, boat, house, or the like. This will help determine if there are any liens or claims against the title on the object for which the borrower is obtaining a loan.
Verify the Borrower’s Income Sources
Verifying a borrower’s income, assets, and employment information is perhaps the most important step in processing a loan application, as it ensures the borrower will be able to pay back the loan. The process of verifying employment information varies depending on specific lenders’ requests. Some require written verification from a borrower’s employer, some will accept tax forms or pay stubs, and some may just request verbal confirmation over the phone.
Appraisals, Insurance, and Inspections
After verifying all income and employment information, the loan processor moves on to checking for any necessary proof of insurance and conducting any necessary appraisals and inspections on the object for which the borrower is obtaining a loan.
Review the File
At this point, the loan processor thoroughly reviews the contents of the loan application and checks for any missing or incomplete information. They should contact the loan officer if anything seems vague or unclear, as well as mark any red flags that appear before sending it off to the underwriter.
Deliver the File to the Underwriter
Once the loan processor is confident the loan application contains all the required information and is compiled in the correct format, it’s time to send the completed loan package to the appropriate parties, likely the lender or underwriter.
Loan Processing at Web Finance Direct: For Lenders
Loan processing is a tedious process that can get complicated with different parties waiting on communication from one another. Working with a full F&I services company like Web Finance Direct helps streamline communication with dealers and bridges the gap between a buyer juggling communications with a dealership and a loan officer. Web Finance Direct is a zero-cost consumer loan acquisition engine for lenders, so we’ll send you qualified applicants from our robust dealer network that meet your specific lending criteria.
Our proven and auditable process meets lenders’ specific underwriting requirements every time. Here are the steps of our lender process:
- WFD sends the loan application to you.
- You review and make a decision.
- WFD delivers the completed package to you.
- WFD resolves any funding issues.
- You fund WFD.
Loan Processing at Web Finance Direct: For Dealers
By outsourcing financial services with a full F&I services company like Web Finance Direct, dealers can offer their customers the best possible financing solutions for them. We handle everything from credit applications to customer communication to closing docs. We can also work with your existing F&I department.
With our process for dealers, you won’t have to worry about getting tangled up in lengthy back and forth with lenders. We make the process simple in just a few steps:
- Sell a vehicle at your dealership.
- Submit the purchase details and the customer’s credit application online.
- WFD team of F&I experts verify the credit application and use our proprietary software to select the best matching lenders. WFD reviews the lending options with your customer.
- WFD team prepares all required loan documents.
- Your customer signs the loan documents and takes possession of their new purchase.
- You submit loan documents for funding.
- Get funded quickly and increase your bottom line!
With the Right Partner, Loan Processing is a Breeze
Just like at dealerships and lenders, loan processing is unique to every finance services company. At Web Finance Direct, we make the loan processing process as simple and convenient as possible from both a dealer and a lender perspective. We connect lenders to a qualified network of dealers and help dealers match their customers with the best financing options. Indirect financing gives lenders more available customers with lower risk and takes the hassle of loan processing off of the shoulders of dealers.