Consumer lending is a growing industry as more people borrow money to buy homes, finance their studies and meet other financial obligations. Lenders and financial institutions offer a wide range of loans, but these companies must have a good understanding of their performance to remain competitive. As a lender, tracking your company's performance may be challenging.
So many numbers are floating around, so a dashboard is an easy way to track your performance and measure your KPIs. Using a dashboard also helps you to arrange and organize your data in a way that is easy to read and works for your business. You can pull automatically generated reports and view your vital information in easy-to-read tables and graphs.
Using a dashboard saves time by eliminating the need to manually arrange data and put together information in a meaningful way. Your dashboard is typically a visual representation of your KPIs so that you can pick up on trends, track progress and decide more effectively. If you're a loan company, consider including the following KPIs and analytics on your dashboard.
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Pull-Through Rate
To work out the pull-through rate, you divide the number of approved loans by the number of loan applications for a specific period, like the month or quarter you want to evaluate. This KPI will give you vital information about the efficiency of your operational processes, the level of customer service your company provides, and how competitive the interest rate is.
You will also get a good indication of the quality of the applications that were submitted and how well matched the customer profile is to your offerings. The pull-through rate won't help you identify specific failings or areas of improvement, but if your pull-through rate is low, investigate further to look for where you can improve.
Your pull-through rate may be low because it takes too long to complete the process, possibly because of inefficiencies. It might also be low because, after shopping around for quotes, customers secured a better rate from a competitor, or maybe the quality of the customer was poor, and their loan was declined to a low credit score. A high pull-through rate is usually a positive sign and could mean that you're ready to expand your offerings or take on new clients.
Application Approval Rate
The application approval rate examines how many loans were approved compared to the number of applications submitted. If your application approval rate is low, it could mean that you are wasting time and resources on applications that do not qualify for loans or that your document collection and review process is inefficient. In this case, finding ways to streamline the review process and evaluate who your ideal customers are would be helpful. Constantly receiving applications from unsuitable candidates costs the company money since each application still has to be reviewed.
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Average Loan Cycle Time
The loan cycle time is the number of days it takes, from when a loan application was submitted to the day the funds are paid to the customer. Some loans may take longer to process, but getting an average number of days is helpful. This is an important KPI for both the business and the customer. A short cycle time means that customers are approved quickly and will receive the funds almost immediately or within a few days.
Access to a quick payday loan or online loan is a massive competitive advantage as customers usually don't want to wait a long time to get the money. A short cycle time also shows that the internal operating and approval processes are efficient and time and resources aren't being wasted. If your loan cycle time is high, it will be helpful to automate some of your processes to speed up the cycle time. Consider an online approval loan system so that customers can be approved or declined faster, allowing you to process more applications in a shorter time.
Incomplete Application Rate
The incomplete application rate measures the number of applications that were closed because of missing or incomplete information compared to the number of applications submitted. A high rating could mean that you are targeting the wrong people. Customers who apply for a loan may not have the information or documentation, leaving out vital information required to complete the process. It may also indicate a problem with your customer service or communication.
Perhaps, customers have the required documentation but are unaware of what they need to submit for approval of the loan application. In some cases, when applying for online loans, the interface may be difficult to use so customers leave out information unknowingly. Since it takes time and money to review applications with missing information and close them because they're incomplete, having a high incomplete application rate increases your operating expenses.
Average Loan Value
The loan value gives you a good idea of how profitable the loans are. To get the average value, take the sum of all the loans approved within a certain period, divided by the number of loans approved in that period. Usually, the time and work it takes to process a loan application is the same, regardless of the amount of money a customer applies to borrow. Therefore, having a low average value means that employees spend a lot of time processing small amounts for low revenue when it would b more profitable to process fewer applications of a higher value.
Abandoned Loan Rate
The abandoned loan rate evaluates the number of loan applications that were approved but not funded compared to the total number of approved loan applications within a period. Ideally, this rate should be low, meaning that most customers who applied for loans and whose loan applications were approved accepted the loan offer. If customers were approved but decided against taking the loan, it would be a waste of company time and resources. A high loan abandonment rate could mean the company's post-application approval process is poor. Perhaps communication is inefficient, the approval process is too slow, or the customer secured a loan from a competitor. Another reason a customer may abandon a loan is that they prefer to take a competitor's loan that offers a lower interest rate and better terms.
References
- Lightico: The 8 Most Important Loan and Mortgage Performance Metrics
- Solverglobal: Loan Performance Dashboard for Banks
- Culytics: Top KPIs for Consumer Lending
- Floify: Key Performance Metrics for Loan Originators and Brokers
- Clearpointstrategy: 17 Key Performance Indicators Every Bank Should Track
- Hesfintech: Most Important Insights & Reports for Your Lending Business