COVID-19 has undermined every industry and every business sector imaginable, with banks and lending institutions suffering from a dual adverse effect. Simon Mosheshvili, Senior Vice President of Latin American Operations at Digital Edge, shares his insights on how the loan administration niche could respond to the COVID-19 challenges productively.
How Are Lending Servicers Affected?
One of the unpredictable yet far-reaching effects of COVID-19 was the quarantine and travel restriction leaving millions of people without work or with a reduced workload, and correspondingly lower salaries. Such a decline in people’s earnings has inevitably reduced their ability to pay their loans, which posed a liquidity issue for the lending organizations. Thus, the lenders conducting loan administration are facing numerous challenges, such as non-returned loans from those who lost their jobs or are on a mandatory leave because of their company’s pause in operations. Besides, they must manage their own employees, providing them with opportunities to work remotely and paying them salaries. Finally, they need to find money for issuing new loans to those who found themselves amid the global pandemic without any financial reserves.
How Should Organizations Respond?
At the first glance, the situation seems critical for both lenders and borrowers. But for the loan administration companies to preserve their positive relationship with customers and to support them in the hard times, it is vital to respond to these challenges proactively. The most constructive responses include:
- Making more services available online;
- Consulting the borrowers on loan forbearance and skipping of payments;
- Provision of precise loan appraisals and refinancing advice online;
- Provision of all loan approval information to reduce the financial uncertainty among clients and to inform them what they can count on.
How Will Loan Administration Change?
As organizations are gradually learning to exist in the new conditions of the global pandemic, one thing is clear – business operations will never be the same, loan administration included. Financial institutions are likely to feel the heaviest burden of the crisis following the quarantine as lots of people lose jobs and can’t afford paying their loans back. Thus, it’s imperative to develop new strategies for clients to manage their loans, to offer more flexible options, and to support the clients in the hard times, helping them recover financially and close the loan without getting into a debt pit.