By | Samantha Higgins
A loan servicing business is a type of loan company that processes and assists borrowers with their monthly payments. When the original company sells the loan to a new lender, this type of company takes over the process and collects any payments (more or less). If you’re considering starting your own loan servicing business, this post will outline five essentials for success.
Different types of loans: Loans can be classified as residential mortgages, commercial mortgages, auto loans, student loans, and personal loans. Most companies will take a certain type of loan and use it to model their own servicing business.
Below are the essentials for a loan servicing business:
1. A Full-Time Staff:
This seems obvious for any business, but it’s very important in a loan servicing company. In addition to processing and collecting the monthly payments of their clients, they also need to keep up with the lending process.
To do this, they need a staff that is capable of delivering accurate data and following procedures to ensure all payments are being collected properly. Also, remember that the company’s reputation is built on the trust and accountability of its clients.
2. A Good Internet Marketing Strategy:
Every loan servicing business needs to have an online profile and a working website with text descriptions and pictures to capture customer interest. Most lenders want a quick response from your company with necessary information when needed (such as payments due or any late charges being reported).
It’s also important for your company to connect with lenders and be viewed by them as an official loan processor. You can do this by adding a link to their company website on your page (if applicable).
3. An Accountant:
Most loan companies have monthly payments that need to be processed promptly. They will be responsible for collecting the monthly payment and depositing it into the client’s account. They’ll also monitor the client’s credit reports and make adjustments as needed. It’s important to have an accountant who knows how the lending industry works and efficiently gets the job done. Other Functions of an accountant include:
- Receipting and verifying payments: this is where they enter the client’s data into a computer database to keep track of each loan.
- Sending invoices to clients can be done via email with a link to pay on your website.
- Maintaining records for each borrower helps the accountant stay updated on the status and progress of their clients.
- Preparing tax statements: keeping track of business expenses will help reduce taxable income for your company.
- Verifying financial data: using their knowledge and resources to verify borrowers’ documentation and data.
- Filing taxes for your business: the accountant will be responsible for submitting the required tax forms on time.
- Preparation of Financial Statements: this is a detailed record of the company’s financial performance, including income, expenses, and assets.
4. A Good Credit Bureau:
The credit reporting system is vital for your company’s success. Without a good rating from the three major credit bureaus (Equifax, Experian, and TransUnion), you’ll need to ensure that every client pays on time and has a good credit score (at least 700).
A good credit report will also make it easier for your company to process transactions. You’ll need a contract from the lender stating that your company is authorized to collect their client’s monthly payments.
You can get access to a client’s credit history by paying one of the bureaus a fee and will be able to use that information in getting the client’s loan.
5. Servicing Software:
You’ll need loan servicing software that is easy to use and allows you to track payments and client loans. It’s also important for your employees to track payments, revenues, and other important information about their employees.
Your software should give you the ability to make quick decisions, send customizable email communications, and track loans and payments.
Also, having a viable business plan is important in managing your loan servicing business. Make sure that your business plan is concise and organized.
There are many competitors in this field, and they’re constantly creating new software to make it easier for their clients to manage their loans. A good software provider will help you stick out from other loan servicing companies in the market.
If you feel you have what it takes to start a loan servicing business, the above will help you get started. This is a competitive industry, but if your company is capable of providing excellent customer service, good credit reporting, and outstanding communication with clients, you’ll be on your way to success.
Samantha Higgins is a professional writer with a passion for research, observation, and innovation. She is nurturing a growing family of twin boys in Portland, Oregon with her husband. She loves kayaking and reading creative non-fiction. If your business specializes in loan servicing, she highly recommends implementing loan servicing software for maximum success.