What's this all about?
Currently, banks are scrambling to put in place loan forgiveness and relief programmes aimed at preventing their customers from falling into financial ruin. It’s a massive undertaking but one that can be better addressed with state-of-the-art technology. In the following article, John Jackson outlines how the LEVERIS platform is helping lenders serve crisis-hit customers in the time of COVID-19.
Read on if you:
- Have been convinced by COVID-19 that traditional bank tech needs a facelift
- Require the technological means to address huge volumes of customer requests
- Want to understand the impact payment breaks have on the customer
- Want to know more about how the LEVERIS loan solution dramatically reduces cost-to-serve by empowering customers to self-manage their loans
“Stick to your knitting.”
It’s an old business adage that comes to mind during this time of turmoil. Why? Because now that we are faced with a pandemic that we knew very little about only a few weeks ago, suddenly everyone is an expert.
At LEVERIS, we’ll stick to what we know best – banking technology.
Because, as you’ll likely know, banks have a massive role to play in addressing the economic and societal fallout from COVID-19.
Some have already taken action, introducing new measures to support borrowers struggling to meet their regular loan repayments. These include the likes of loan repayment breaks, new simplified loan application processes, and assurances that payment breaks during COVID-19 will not affect a customer’s credit record. UK money comparison site Moneyfacts has a handy breakdown of what British lenders are doing for example.
While these measures go some way to address the financial challenges facing customers, the problem remains that many banks still possess outdated technology that just can’t handle the volume of customers requiring attention right now.
That’s where technology comes in and LEVERIS is here to help. Our platform provides a number of features and capabilities that can be used by our clients to support their customers and address their individual needs. Here’s a glance at some:
Payment breaks through the LEVERIS loan manager
Also known as a temporary deferral of payment, payment holiday or moratorium, a payment break is an agreement between the borrower and the lender to temporarily stop scheduled repayments associated with a loan.
Our clients can use the LEVERIS loan manager and, in particular, the payment break functionality to help existing customers who are experiencing difficulties. Depending on the customer’s circumstances and our client’s position during this crisis, they can choose from three types of payment breaks:
1. Moratorium payment break
This is where full loan repayments stop for an agreed period. Once the moratorium period is over, customer repayments can be increased for the remainder of the term to cover the underpaid principal and interest. Another option is extending the term to allow the repayments to stay the same as they were beforehand.
2. Interest-only payment
During the agreed period, customers only pay the interest portion of a loan repayment. But since no principal payments are made, the loan balance is not reduced. Once the interest-only period is over, customer repayments can be increased for the remainder of the term to cover the underpaid principal. Alternatively, the term can be extended to allow the repayments to stay the same as they were prior to the interest-only period.
3. loan freeze
Clients can also ‘freeze’ loans for a period of time. This will stop all payments on the loan for the selected period. As no interest will accrue, there will be no interest due when repayments restart.
Each of these options can be offered easily to customers without the need for lengthy and complex manual processes and involvement from numerous actors. A number of automated features on the LEVERIS platform enable us to achieve this, such as the ability to calculate payment adjustments, update terms of direct debit repayments, cease current arrangements and switch to new terms, and inform a customer when payments restart.
These features not only allow our clients to address their customers’ needs head-on but also conduct it seamlessly.
what impact do payment breaks have?
The impact of payment breaks on the customer varies depending on the option applied. No matter what, the customer’s repayments will increase following completion of the new arrangement unless the loan term has been extended.
Here’s a breakdown of what that impact looks like in each of the three scenarios:
1. moratorium payment break
In this case, the borrower will remain liable for the unpaid principal and interest. This will accrue and be applied to the balance after the moratorium is over.
2. interest-only payment
The borrower will only remain liable for the unpaid principal as the interest will be paid during the break period. The principal balance will not reduce during the interest-only period.
3. loan freeze
With this option, the borrower will remain liable for the unpaid principal but no interest will accrue. The principal balance will not reduce during the loan freeze period.
In each instance, once the payment break period is over, the customer has two options:
- Increase the monthly repayments to cover the underpaid or,
- Extend the term and leave payments as they are to take the balance increase into account
designing solutions for client and customer during covid-19
All of the functionality outlined above is provided through the LEVERIS loan manager and designed to be easily usable by our clients so they can make a real difference in customers’ lives – as they navigate these times of difficulty and uncertainty, and whenever necessary.
As we adapt to the new normal and fathom the next, we are now more than ever seeing the importance of pulling together and the potential for technology to make everyday lives better.
At LEVERIS, our mission as always is to imagine better and improve the way things work for both individuals and society. We work side-by-side with our clients to design solutions that meet all their requirements and deliver the best possible outcomes for client and customer alike.
These are indeed challenging and uncertain times for people and businesses. Through it all, LEVERIS will stick to its knitting.
To learn more of how we put this into practice in the real-world, check out our case study below that goes into a bit more detail.
A case study
A real-time, highly automated loan servicing solution with unlimited options for product differentiation.