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Importance of home loans - Contribution of the home loan industry to the Indian economy.
For most individuals buying a house is the largest investment in their personal lives. The housing loan industry has a major contribution to the Indian Economy. According to the report, By 2025 the real estate industry’s contribution to the GDP will be 13%. The demand for the housing industry is increasing with the growing population. The Indian government has also taken an initiative by launching the PMAY Pradhan Mantri Aawas Yojana which aims to provide affordable housing for economically weaker sections of society. The individuals from this section of society approach finance companies for housing loans.
For a finance company to become viable at small loan values like affordable housing loans, they need to be able to approve and collect a loan with low time and cost. The role of a good lending system is hence to reduce the time and cost of onboarding a new customer, approving a loan, assessing the creditworthiness of a customer, and collecting the EMIs.
What makes the process of giving home loans complex?
As compared to other loan products, housing finance is more complex, since it involves the collection of many documents, as well as their verifications and approval procedures. The housing finance company collects many documents from customers such as buyer-seller agreements, and property title deeds; and gets their physical and legal verification, and valuation is done. Many of these activities are outsourced to external agencies. These agencies are allocated work, and they submit reports after doing this work.
These documents and reports have to be gone through by various departments within the finance company, for risk assessment. Therefore all those papers will have to travel from place to place, and this requires time and cost.
How can these times and costs be reduced? How can technology help in this?
Technology can reduce the time and cost of handling the above documents and processes.
If the field personnel visiting the clients can capture and scan documents from mobile apps from the field itself, without bringing these documents physically to the branches, and forward softcopies to the concerned departments for further processing, this will help the finance company to carry out the process with significantly lower time and cost.
A good LOS (Loan Origination Software) can help achieve the above. The LMS (Loan Management Software), can do calculations for repayment schedules, monitor and perform various post-disbursement loan actions such as loan rescheduling, loan linking, knock-off, etc. This can also reduce a lot of time and effort of doing operations manually.
How much time and cost can be reduced?
Saving time and cost can be important factors in growing an organization and increasing revenue. We can cut back on the costs associated with document processing and on-field handling.
Consider a finance company with 10 branches and a loan book worth Rs. 500 crores. Typically they have some operations people in branches whose main job is to scrutinize and scan documents brought by their sales teams. If one employee per branch can be reduced, earning Rs. 30,000 per month, then yearly expenses over this could be Rs 3.6 Lakhs. For 10 branches, this cost reduction will be Rs. 36 Lakhs.
There is a time reduction as well. The time taken from lead to disbursement is typically 2-3 weeks for a home loan. Due to this, many customers lose their patience and go to competitors. With a tech-savvy LOS having on-field document scanning capabilities, this time can be brought down to 4-5 days.
A lending solution like document scan and management software can reduce the need for field personnel and save time.
How can Synoriq help?
Synoriq offers an end-to-end lending system, including LOS, LMS, Collections, Sales app, credit app, and so on. It also offers SynoFin DocScan, a cloud-based document management system that enables field sales teams to scan and upload documents from customer homes and business locations.
Synoriq’s SynoFin has been implemented in more than 18 NBFCs, covering home loans, loans against property, personal loans, vehicle loans, MSME secured and unsecured, and so on.
There are 100+ APIs available in the system, and it can be easily integrated with external best-of-breed systems.
To know more about SynoFin DocScan visit: www.synofin.tech/
Go green, and save the environment by having a paperless loan journey with SYNORIQ!