Attending to loans is one side of the business. Be it a bank, NBFC or even fintech companies or a credit institution, everyone requires timely repayments to keep up their cash flow. But it isn’t always easy to collect those loan payments. A lot of lenders have day-to-day problems with late payments, a lack of communication with borrowers, all this manual work and compliance.
Nowadays, technology has a big say in solving these issues. With new loan collection software and loan servicing technology, lenders can run a more efficient collections operation, save time, and build better borrower relationships.
This blog breaks down the common collection challenges lenders face and how software solves them.
Key fact
- Nearly 88% of debt collection companies now offer a self-service online portal for payments, showing how digital tools are becoming essential for more efficient collections. Trans Union.
- The India debt collection software market size reached USD 172.80 Million in 2024. Looking forward, IMARC Group expects the market to reach USD 456.30 Million by 2033. Imarc.
- The market is growing at a CAGR of 10.48% from 2025-2033. Imarc.
- The global debt collection services market is set to reach a valuation of US$30.2 billion in 2023. The market is further expected to grow at a CAGR of 2.7% for the next 10 years and end up at US$39.4 billion by 2033. Fact Mr.
Why Loan Collection Is Hard for Lenders?
Loan collection is more than the process of calling borrowers for payments. This includes keeping track of the due dates, sending reminders, recording the payment and following legal rules to ensure good records are kept. When these processes are manual, errors and time-lags are frequent.
The following are some of the biggest problems lenders encounter.
Scattered and Unorganized Data
Many lenders continue to have borrower data in different systems or even spreadsheets. Payment information, contact details and follow-up notes are not necessarily all in one place.
Problems caused:
- Missing or incorrect borrower details
- Confusion about payment status
- Difficulty tracking overdue accounts
How software helps:
All the borrower details are systematically that is well arranged in one unit. Lenders have a dashboard where they can see all loan information, credit history and communications on one page. That way, this helps me minimize any mistakes and time.
Missed Follow-Ups and Late Payments
It is very hard to follow up with the manual ways of debt collection. Follow-ups only depend on the memory, and you can forget about those. This creates missed payment dates.
Problems caused:
- Borrowers forget payment dates because of the manual ways of reminding them.
- It becomes a burden for the bank as overdue accounts increase, as no proper reminders are being delivered.
- Manual process also causes lower recovery rates.
How software helps:
Automatic payment reminders via SMS, email or WhatsApp at pre- and post-due dates are sent by the software. It allows borrowers to be reminded sufficiently in time and ensures better collection.
Lack of Real-Time Visibility
Manual debt collection has a lot of flaws where you cannot see real-time information about the loan repayments and what is happening in the bank or NBFC related to the firm.
Problems caused:
- Employers do not have real-time data about the overdue loans and loan repayments of loans.
- It is hard to measure the staff performance using the manual ways of debt collection.
- When you do not have real-time insights, it can cause a Delay in decision-making.
How software helps:
Debt collection software provides you the real-time insights and monitoring of the processes happening in your firm. It shows you the complete data of the borrowers with one click. Data is available on the easy-to-look-at and understand dashboards.
Poor Communication with Borrowers
It is always challenging to maintain proper communication with borrowers. Manual processes involved a lot of calls and messages that can irritate the customer.
Problems caused:
- Using manual ways to get the loan can give rise to low response rates.
- It always gives rise to a bad experience with the customer, and customer retention is lost for future business.
- It does not allow a healthy trust to build between the lenders and borrowers.
How software helps:
Debt collection software does not call frequently about the loan repayments. It sets up a complete relationship with the customer to make sure that it offers the highest quality services, and lenders can provide personalized communication to the borrowers.
Compliance and Legal Issues
Loan recovery is controlled by guidelines. It is difficult to follow all guidelines correctly with manual processes.
Problems caused:
- Risk of legal penalties
- Missing audit records
- Non-compliant communication
How software helps:
Auto-compliance rules are also met, call and message logs can automatically be kept 5-7 years in accordance with recent shifts in industry practice, and audit trails are built. This keeps lenders safe and compliant.
High Manual Working and Operating Costs
Manual gathering of data soaks up a lot of staff time, taking calls and entering data and reporting.
Problems caused:
- High operational costs
- Staff burnout
- Low productivity
How software helps:
Automation reduces manual work. Recurring duties, such as tasking reminders, task updates and reporting, are dealt with easily by the system freeing up staff to concentrate on complex matters.
Disconnected Systems
The collection teams commonly use systems that don’t communicate with loan origination or accounting platforms.
Problems caused:
- Duplicate data entry
- Incomplete borrower information
- Slow coordination between teams
How software helps:
Collection Software interfaces with other systems like CRM, accounting and payment gateways. This integration makes the workflow easy and seamless.
Benefits of Using Collection Software
Lenders benefit from numerous advantages when they use collection software:
Faster Payment Recovery
Automated reminders and easier tracking lead to collecting dues faster.
Lower Operational Costs
Less manual work also implies lower staff and administrative costs.
Better Customer Experience
Communicate transparently, politely and promptly to keep borrower trust.
Improved Compliance
Built-in rules make it easier for lenders to comply with laws and avoid penalties.
Data-Driven Decisions
Reports and insights allow lenders to optimize their strategies over time.
BlockQuote
Collection software helps lenders recover faster, reduce costs, and stay compliant in an increasingly regulated lending environment.
Conclusion
Collecting loans and repayment of the debt can be very overwhelming when you are doing it manually. It is always the best choice to use a loan collection software so that you can ease out the complete process and make sure that you get the payments easily without any hindrance.
Jaguar Software India provides the best quality loan collection software to make sure that you get the best out of your customers. The company provides it to the lending firms, and these can be easily customized. To get a quote for the debt collection software india, make sure you contact us at the details mentioned below.
Company Name – Jaguar Software India
Phone No – +919666107000
Address – 18-19, Rajinder Nagar, Police Lines Road, Jalandhar, India
Email – info@jaguarsoftwareindia.com
Website – https://jaguarsoftwareindia.com/
Frequently asked questions
What are the typical loan collection problems that lenders face?
Lending professionals often struggle with issues like late payments, weak follow-ups and disorganized data of the borrower, manual workloads, no access to real-time reporting and compliance penalties. These are the problems that make collections perform poorly.
Why Is It Difficult To Collect Loan Manually Now?
Manual gathering is mainly based on calls to people, spreadsheets and reminders from staff, which often results in formation errors, lateness and lack of follow-up. It also raises operational expenses and compliance is problematic.
How do lenders benefit from collection software?
Debt collection software streamlines reminders, manages borrower information, monitors payments, offers reports in real time and ensures compliance. It saves time for lenders, reduces errors and enhances recovery rates.
Can my collection program help bring in more recoveries?
Yes, automated reminders, enhanced tracking and customized communication remind borrowers when their due dates are and prompt a response so that the overall recovery of payments is better.
Can collection software be used by small lenders and NBFCs?
Absolutely. Lenders of any size benefit from collection software. Smaller lenders and NBFCs have better services, good collection organisation and low cost of operating.
What is the role played by debt collection software in enhancing communication with a borrower?
The tool enables lenders to send timely and customised messages via SMS, emails, WhatsApp or calls. This results in better borrower engagement & less confusion.
