There are many ways credit unions can choose to operate their lending process, however, not all methods are created equal. A centralized lending strategy can provide a clear and concise plan for lending that eliminates problems associated with other methods. With other lending practices, there are opportunities for error, not to mention the additional cost that stems from inefficiencies and training. Centralized lending helps to diminish these issues while maximizing employee skills as well as their time. Here are six reasons why centralized lending is the best route for credit unions.
1. Increase efficiency
Adopting a centralized lending process can dramatically increase efficiency and productivity in the lending department. It allows employees to specialize in each of their areas of the complete lending process and become extremely knowledgeable at their portion of the work. Think of an assembly line. You don't expect one machine or employee to complete the entire process of constructing a product. It's more efficient to have each employee or machine specialize in one or two specific steps.
2. Maximize employee skill sets
Allowing each employee to master their portion of the lending process alleviates many employees from one of the most feared steps... selling. Few are cut out for and properly trained to be effective salespeople. It's important that credit unions identify or train who their best sales individuals are and place them where they can be successful.
3. Decrease training expenses
Focusing employees on only one skill set also leads to decreased training costs for the credit union. Employees will not need to be highly trained on the steps of the lending process they don't perform, which decrease the number of training hours they’ll need to complete and drives down training expenses. This makes it easier to schedule training sessions and allows trainers to provide more one-on-one help as needed.
4. Increase lending profits
Less time spent on the lending process and increased efficiency means that profits should increase. Cutting the cost it takes to manage and produce a loan allows your credit union to increase your bottom line. This increases the overall value of a credit unions lending process because loans are not only more cost-effective, they’re also funded faster and with fewer errors. Many organizations are looking to cut expenses, but oftentimes there are drawbacks to doing so. With centralized lending, quality is not compromised for efficiency and savings.
5. Diminish employee errors
Another benefit of focusing employees on one skill is that the likelihood of errors decreases. As experts in their area, they will be able to do their job more easily, effectively, and at lower risk of making mistakes. In lending especially, errors can be extremely costly. High loan losses are devastating to any credit union and also cause disruptions for the member during the lending process.
6. Streamline the process
The greatest benefit of centralized lending is being able to streamline the process. Having one senior manager at the helm of the lending department sharpens their control over the process. It allows the senior manager to oversee the day-to-day operations better and keep a close relationship with both employees and members. In centralized lending, focused employee roles - in conjunction with clearly defined steps in the lending process - leads to a repeatable and dependable lending solution.
While there are many lending processes which are able to serve the needs of a credit union, centralized lending provides unmatched capabilities. Credit unions should be able to easily adopt centralized lending in their Loan Origination System (LOS). Assigning a new loan officer needs to be simple and notifications that you have been assigned a loan or application should be natively built in. Additionally, security or permission parameters will help appease auditors who question the centralized lending process and want to verify that one employee cant approve and fund a loan. The bottom line is that technology should enhance, not hinder your adoption of a centralized lending process.