CA2955335A1 - Automated loan underwriting - Google Patents
Automated loan underwriting Download PDFInfo
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- CA2955335A1 CA2955335A1 CA2955335A CA2955335A CA2955335A1 CA 2955335 A1 CA2955335 A1 CA 2955335A1 CA 2955335 A CA2955335 A CA 2955335A CA 2955335 A CA2955335 A CA 2955335A CA 2955335 A1 CA2955335 A1 CA 2955335A1
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- G—PHYSICS
- G06—COMPUTING; CALCULATING OR COUNTING
- G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
- G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
- G06Q40/03—Credit; Loans; Processing thereof
Abstract
A method and process of Automated Loan Underwriting to provide Guaranteed Loan Approvals with specific dollar values and no requirement for any consumer personal information, while simultaneously significantly mitigating risk for the lender beyond normal industry standards. The method and process will also include complete loan profiles with interactive loan variables.
Field of Invention The method and processes are related to financial services whereby financing is provided to consumers who would not normally be able to obtain financing for repairing or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for the decision making process of obtaining required Guaranteed Loan Approvals, with Maximum Loan Amounts stipulated, to proceed with decision making regarding financing for Passenger Vehicle mechanical repair, or improvement. Consumers will not have to present themselves, or any personal information, to a vendor or lender to obtain a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete departure from all normal credit issuing methods and processes. The consumer remains completely anonymous as they acquire the Guaranteed Loan Approval with a Maximum Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount is valid for use by the lawfully registered owner of the vehicle BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories are able to easily make lending decisions based primarily on an applicant's credit score.
However, even then, lenders do require substantial personal information as well.
The credit-challenged demographic in Canada is represented by the following statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maggiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency/#2715e4857a0b16466d896dde (c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack reported that annually 600,000 non-prime consumers apply for an automotive related loan annually, but 88% are declined.
Field of Invention The method and processes are related to financial services whereby financing is provided to consumers who would not normally be able to obtain financing for repairing or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for the decision making process of obtaining required Guaranteed Loan Approvals, with Maximum Loan Amounts stipulated, to proceed with decision making regarding financing for Passenger Vehicle mechanical repair, or improvement. Consumers will not have to present themselves, or any personal information, to a vendor or lender to obtain a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete departure from all normal credit issuing methods and processes. The consumer remains completely anonymous as they acquire the Guaranteed Loan Approval with a Maximum Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount is valid for use by the lawfully registered owner of the vehicle BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories are able to easily make lending decisions based primarily on an applicant's credit score.
However, even then, lenders do require substantial personal information as well.
The credit-challenged demographic in Canada is represented by the following statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maggiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency/#2715e4857a0b16466d896dde (c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack reported that annually 600,000 non-prime consumers apply for an automotive related loan annually, but 88% are declined.
Description
Application number / Numero de demande : (9 cis sS
5.
OeõsQ_Ri pL_Loyo pckcy Unscannable items received with this application (Request original documents in File Prep. Section on the 10th floor) Documents recu avec cette demande ne pouvant etre balayes (Commander les documents originaux dans la section de la preparation des dossiers au 10' Rage) ABSTRACT
A method and process of Automated Loan Underwriting to provide Guaranteed Loan Approvals with specific dollar values and no requirement for any consumer personal information, while simultaneously significantly mitigating risk for the lender beyond normal industry standards. The method and process will also include complete loan profiles with interactive loan variables.
Field of Invention The method and processes are related to financial services whereby financing is provided to consumers who would not normally be able to obtain financing for repairing or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for the decision making process of obtaining required Guaranteed Loan Approvals, with Maximum Loan Amounts stipulated, to proceed with decision making regarding financing for Passenger Vehicle mechanical repair, or improvement. Consumers will not have to present themselves, or any personal information, to a vendor or lender to obtain a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete departure from all normal credit issuing methods and processes. The consumer remains completely anonymous as they acquire the Guaranteed Loan Approval with a Maximum Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount is valid for use by the lawfully registered owner of the vehicle BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories are able to easily make lending decisions based primarily on an applicant's credit score.
However, even then, lenders do require substantial personal information as well.
The credit-challenged demographic in Canada is represented by the following statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maqqiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emerqencv/#2715e4857a0b16466d896dde (c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack reported that annually 600,000 non-prime consumers apply for an automotive related loan annually, but 88% are declined.
5.
OeõsQ_Ri pL_Loyo pckcy Unscannable items received with this application (Request original documents in File Prep. Section on the 10th floor) Documents recu avec cette demande ne pouvant etre balayes (Commander les documents originaux dans la section de la preparation des dossiers au 10' Rage) ABSTRACT
A method and process of Automated Loan Underwriting to provide Guaranteed Loan Approvals with specific dollar values and no requirement for any consumer personal information, while simultaneously significantly mitigating risk for the lender beyond normal industry standards. The method and process will also include complete loan profiles with interactive loan variables.
Field of Invention The method and processes are related to financial services whereby financing is provided to consumers who would not normally be able to obtain financing for repairing or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for the decision making process of obtaining required Guaranteed Loan Approvals, with Maximum Loan Amounts stipulated, to proceed with decision making regarding financing for Passenger Vehicle mechanical repair, or improvement. Consumers will not have to present themselves, or any personal information, to a vendor or lender to obtain a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete departure from all normal credit issuing methods and processes. The consumer remains completely anonymous as they acquire the Guaranteed Loan Approval with a Maximum Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount is valid for use by the lawfully registered owner of the vehicle BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories are able to easily make lending decisions based primarily on an applicant's credit score.
However, even then, lenders do require substantial personal information as well.
The credit-challenged demographic in Canada is represented by the following statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maqqiemcgrath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emerqencv/#2715e4857a0b16466d896dde (c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack reported that annually 600,000 non-prime consumers apply for an automotive related loan annually, but 88% are declined.
2 56% of Canadians are within $200 per Month of Not Being Able to Pay Their Bills", Februaty 15, 2016 Financial Post See article --http://business.financialpost.com/news/economy/nearly-half-canadians-within-200-a-month-of-being-unable-to-pay-bills-poll-finds (f) 40% of consumers do not have credit cards Most credit-challenged consumers have poor credit scores, therefore lenders require a significantly larger amount of personal information and paperwork -- i.e., income verification (pay stubs), tax returns, social security numbers, employment confirmations, residence confirmations, personal references, lease agreements, utility bills, down payments, co-signers, etc. -- to make a lending decision.
The application and approval process can take hours or even days for both the borrower and lender. For the lender the process to issue a loan approval is subjective and labor-intensive. For the credit-challenged-consumer, the application process is usually onerous, invasive and stressful. A high percentage of applications from credit-challenged consumers will not qualify for financing because they expect to be declined and do not want to go through a rigorous application only to be embarrassed.
CONVENTIONAL LOAN APPROVALS ARE BASED ON
CONVENTIONAL UNDERWRITING
Loan underwriting is the process a lender uses to determine if the risk of offering a loan to a particular borrower under certain parameters is acceptable:
Conventional Underwriting is the process that is undertaken to analyze all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets minimum loan approval criteria.
As part of that process all data is verified, analyzed and summarized to paint a picture of each applicant.
An underwriting review of each case is done to assess the likelihood of borrowers making their required payments based on both the current affordability of the loan and their financial past. This means that they only approve loan applications where it is clear loan repayments are affordable, based on the applicant's income and outgoings, for the term of the loan, and that the applicant has a strong record of managing credit in the past.
An underwriter will review everything. This begins with the declarations on the application form. The key characteristics considered are age, employment status, income, how long in current property, residential status, loan amount, loan purpose and how many earners there are in household.
The application and approval process can take hours or even days for both the borrower and lender. For the lender the process to issue a loan approval is subjective and labor-intensive. For the credit-challenged-consumer, the application process is usually onerous, invasive and stressful. A high percentage of applications from credit-challenged consumers will not qualify for financing because they expect to be declined and do not want to go through a rigorous application only to be embarrassed.
CONVENTIONAL LOAN APPROVALS ARE BASED ON
CONVENTIONAL UNDERWRITING
Loan underwriting is the process a lender uses to determine if the risk of offering a loan to a particular borrower under certain parameters is acceptable:
Conventional Underwriting is the process that is undertaken to analyze all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets minimum loan approval criteria.
As part of that process all data is verified, analyzed and summarized to paint a picture of each applicant.
An underwriting review of each case is done to assess the likelihood of borrowers making their required payments based on both the current affordability of the loan and their financial past. This means that they only approve loan applications where it is clear loan repayments are affordable, based on the applicant's income and outgoings, for the term of the loan, and that the applicant has a strong record of managing credit in the past.
An underwriter will review everything. This begins with the declarations on the application form. The key characteristics considered are age, employment status, income, how long in current property, residential status, loan amount, loan purpose and how many earners there are in household.
3 Underwriters use electronic identification procedures by connecting directly with Equifax, or other credit reporting agencies, to verify identity and payment history performance.
They compare key credit data such as mortgages, loans, credit cards and bank overdraft records against those disclosed by you in the application. They also review how many other financial services companies have searched the customer and look at the customer's financial associations (other people that you share a financial relationship them).
The credit search shows payment history as reported by other lenders and validates whether they have had any adverse credit in the past. Even late payments are reported on a credit search and can adversely affect your application.
They often ask for copies of recent bank statements or down payments during the underwriting process. Doing this helps them to understand how well the customer manages their money. Bank statements also allow confirmation of the following information:
= Full name and address = Salary and whether they are on a regular basis and are a regular amount = General transactional history and whether regular payments are made to credit agreements = Any recent unpaid or reversed transactions = Credit payments not disclosed on your application form = Evidence of short-term high-cost credit usage (for example payday lending) or excessive online gambling = Outgoing day-to-day costs, spending habits and ongoing obligations = Use of authorized credit limits Once they have verified income, outgoings and credit history, they use an objective mathematical formula to calculate the affordability score and creditworthiness score.
The results of these calculations allow the assessment of the following:
= What is the value of total debt outstanding? Is this sustainable and reasonable in comparison to annual net income?
= Is the loan affordable based on compulsory financial obligations, including the loan applied for when compared against income?
= Is there sufficient disposable income after all commitments and living expenses are taken into account?
They compare key credit data such as mortgages, loans, credit cards and bank overdraft records against those disclosed by you in the application. They also review how many other financial services companies have searched the customer and look at the customer's financial associations (other people that you share a financial relationship them).
The credit search shows payment history as reported by other lenders and validates whether they have had any adverse credit in the past. Even late payments are reported on a credit search and can adversely affect your application.
They often ask for copies of recent bank statements or down payments during the underwriting process. Doing this helps them to understand how well the customer manages their money. Bank statements also allow confirmation of the following information:
= Full name and address = Salary and whether they are on a regular basis and are a regular amount = General transactional history and whether regular payments are made to credit agreements = Any recent unpaid or reversed transactions = Credit payments not disclosed on your application form = Evidence of short-term high-cost credit usage (for example payday lending) or excessive online gambling = Outgoing day-to-day costs, spending habits and ongoing obligations = Use of authorized credit limits Once they have verified income, outgoings and credit history, they use an objective mathematical formula to calculate the affordability score and creditworthiness score.
The results of these calculations allow the assessment of the following:
= What is the value of total debt outstanding? Is this sustainable and reasonable in comparison to annual net income?
= Is the loan affordable based on compulsory financial obligations, including the loan applied for when compared against income?
= Is there sufficient disposable income after all commitments and living expenses are taken into account?
4 On occasion the underwriter will ask for further information, for example pay slips if net income is or cannot otherwise be verified. Underwriters may also ask for clarification of detail from the applicant's documents or disclosures.
Lenders use a risk model to determine the price of a loan for each individual applicant.
They consider all of the data and information described above to assess how likely it is that the customer will meet all of the loan repayments. To do this they also look at various key characteristics ¨ for example if they own their own home since experience shows that the risk of default is lower, and therefore the APR (Annual Percentage Rate) offered will likely be lower.
At the other end of the scale, applicants who display signs of a transient nature, for example renting at a number of different addresses over the past few years, are inherently riskier and therefore the cost of their loan will be higher or declined.
Each loan application is meticulously underwritten by underwriting professionals. If they cannot establish creditworthiness or that the loan is affordable then they will be unable to accept the loan application. Ultimately the approval of a loan becomes a subjective decision to a significant degree, requiring extensive personnel experience and specific application review.
A conventional Loan Application is a labor intensive and time consuming process for the lender and an onerous and anxiety filled task for a loan applicant.
"Asset-based Underwriting" Process for Subprime Consumers Needing Financing For Auto Repair or Improvements Consumer Credit:
Finance companies make lending or underwriting decisions to consumers based on a consumer's credit profile or score.
There are several credit scoring software companies that track consumer's payment history, debt load etc. to determine a consumers credit score.
The leading credit scoring company is "FICO" founded in 1956 by software engineers Bill Fair and Earl Isaac (Fair Isaac Company of FICO). FICO is a NYSE company, has 100's of patents and pending patents protecting their proprietary software and generate almost a billion dollar annually selling credit score data to lenders who make trillions of loans based on FICO credit scores Based on their credit score consumers generally have two types of credit profiles 1) prime credit and 2) subprime credit Prime credit consumers can access traditional financing from banks, credit card companies, car manufacturers, etc.
Subprime Credit Consumers:
Subprime Credit Consumers (or Credit-challenged consumers) cannot access traditional financing and must rely on alternative financing companies, many of which are predatory lenders (payday loans, title loan companies, etc.) charging interest rates ranging from 60% to 750%.
Credit-challenged consumers are a large demographic representing 56% of all consumers. 88% of credit applications from sub-prime credit consumers are declined Subprime Credit Car Purchase Lending -- Car loans to subprime consumers is a large business. Approximately 35% of all used cars sold are to subprime credit consumers who need financing.
Problems for Subprime Consumers and Vehicle Repair Service Centers:
A major trend in recent years in the auto repair industry is as cars have become more technology advanced car vehicle repairs have become more expensive with a major repair costing in the $2,000 to $4,000 range Subprime consumers own the majority of older cars, with most out of warranty.
A
serious problem for these consumers is a major car repair. Most times it is unexpected and can cost $1,000's of dollars. A recent survey showed that over 60% of consumers have less than $1,000 in the bank.
Subprime consumers not being able to afford a major vehicle repair is also a large problem for auto repair service centers. Approximately 33% of quotes written are not acted on because the consumer cannot afford the repair and does not have access to financing. Unacted upon repair quotes cost the auto repair industry billions of dollars annually in Canada alone.
Automotive Repair Service Centers in Canada operate at 55% of capacity. 50% of required work not being done is due to consumers being unable to afford the cost and inability to finance the required work.
Unlike the automobile sales industry, where all vendors of automobile have an in-house financing provision via 3rd party lenders, the auto repair industry has no such provision. The repair industry is not as mature or sophisticated, therefore are unable to manage consumer financing at point of sale as the auto sale industry does. To incorporate point of sale financing to the auto repair industry it is necessary to automate the entire process as much as possible, and in such a manner as results and processes are completed with minimal work required by the service center. The most time consuming process obtaining financing is the application and approval process.
Whereas financing and purchasing of an automobile is usually a decision and action of choice, the repair of an expensive auto repair is usually unexpected and requires immediate decision making and action. An automated underwriting method and process is crucial to expediting the required decisions and actions under the duress resulting from lack of time and money.
Additionally is important to note the dollar volume of financing provided in the used auto sales industry makes the employment of full time finance managers a viable option. Where the auto dealer may originate $20,000.00 to over $100,000.00 a day in 3rd party loans, a very large and successful repair service center may only average $500.00 to $1500.00 a day in loan originations. It is therefore crucial to provide fast efficient automated systems and methods to minimize administration costs normally associated with having an in-house finance manager.
PRIOR ART:
There are over 49,000 financial services providers in Canada and a proportional number in the United States. None of them will provide a written Guaranteed Loan Approval, including a Maximum Loan Amount without various and sometimes significant amounts of personal information on the prospective borrower.
It is common to see signing and advertising claiming such things as "No Credit Checks", "Guaranteed Approvals", "Everyone Approved", etc. However, in all cases these offerings are subject to extensive consumer information from which the lender will base numerous subsequent stipulations for the loan to actually be approved. Many of the stipulations are onerous and punitive the consumer simply cannot comply in order to actually obtain the approval.
The applicant has found Prior Art that is similar in that some Loan Underwriting methods are automated; however, all do require various amounts pf personal information on the potential borrower prior to issuing loan approval.
See below:
Loan underwriting system and method Automates the loan making decision upon receipt of borrower information Mortgage loan system and method US 20070067234 Al Requires borrower's personal information Method and system for loan organization and underwriting US 20080103963 Al Requires borrower's personal information / loan application SYSTEM AND METHOD FOR ONLINE EVALUATION AND UNDERWRITING OF
LOAN PRODUCTS
IPC8 Class: AGO6Q4002F1 Requires borrower's personal information / loan application Systems and methods for underwriting loans Requires borrower's personal information / loan application Automated loan approval system Requires borrower's personal information / loan application Network based loan approval and document origination system US 20010032178 Al Requires borrower's personal information / loan application System and method for real time loan approval Requires borrower's personal information / loan application System and method for online evaluation and underwriting of loan products US 20160042451 Al Requires borrower's personal information / loan application A search of the Canadian Intellectual Property office's Patent Data Base of automated loan underwriting system, automated loan approvals, loan approval underwriting, loan underwriting indicate no patents were found matching the query Results of Search in US Patents Text Collection db for:
"automated loan underwriting" AND "automated loan approvals": 0 patents.
Results of Search in US Patents Text Collection db for:
ABSTr guaranteed loan approvals": 0 patents.
No patents have matched your query Description of Asset-Based Underwriting Process and Method for Subprime Credit Consumers Applicable to Auto Repair and Improvements Financing.
Enables the consumer, or vendor, to obtain the Guaranteed Approved Loan and Maximum Amount independent of the lender's active involvement.
Underwriting method and processes will not require a 'Loan Application', will not issue a subsequent 'Approval', will not do a 'Credit Check', will not require an 'Income Verification', will not require 'Employment Verification', will not require a 'Residence Verification' or any other conventional stipulation to issue a Guaranteed Loan Approval and Maximum Loan Amount.
Normally this seems quite counter-intuitive and even reckless lending. It is counter-intuitive, but it is not risky. The method and process creates a responsible loan approval model which by-passes all of the conventional underwriting and lending practices.
How is this accomplished?
Establishment of relationships with the automotive wholesale sales industry across the nation. Data is accessed nation-wide on a base 24/7/365 basis and updated daily.
Utilizing proprietary software created results in providing a method for consumers and vendors to confirm a Guaranteed Approved Loan and Amount available on any given passenger vehicle on any given day. It is a simple 20 second process done on line via the lender's website.
How a Guaranteed Loan Approval and Maximum Loan Amount is Created On the Lender's web portal the user enters the following information only:
YEAR... ... limited to 13 model years or newer MAKE
MODEL
STYLE ....options are automatically presented for consumer choice TRIM ....... options are automatically presented for consumer choice KILOMETERS... .limited to 250.000 kilometers or less OPTIONS.. ..options are automatically presented for consumer choice OWNERSHIP... .confirmation of lawfully owned and lawfully registered ownership HISTORY ......... confirmation the owned vehicle is not an accident write off or branded as a write-off re-build.
The user clicks on "Submit" and is instantly presented with a written guarantee of his/her Guaranteed Loan Approval and maximum amount.
Note* No personal information is required.
The 'Maximum Guaranteed Loan Approval and Maximum Amount' is automatically calculated as being a pre- determined percentage of the very lowest current wholesale pricing on the very day the information is inputted, 24/7/365 Reviewing the industry valuations grid there are four (4) potential categories for values:
Extra-Clean Clean Average Rough New YEAR MAKE MODEL TRIM
STYLE __________ Used' 2010 2d1 Cadillac _III Escalade 2:11 ESV
Select Retail Add/Deducts Residuals Industry Extra Clean Clean Average Rough Base Wholesale Add/Deduct(+/-KM Adjust(-) 0 0 Total Wholesale Ontario Region I Kilometres I 13500( Term I Annual Kilometres I Ca Lutate Guaranteed Loan Approval and Maximum Loan Amount valuation is always based on 'Rough Book' ( the lowest pricing), and additionally, always based on the market area with the lowest prevailing market prices, which in Canada, is Ontario.
With 'Guaranteed Loan Approval and Maximum Loan Amount' information in hand the consumer can go to any Auto Service Center of their choice and arrange to have the work done and financed by the lender.
A Service Center may also initiate the 'Guaranteed Loan Approval and Maximum Amount' confirmation at point of sale with a "walk-in" customer.
In addition to providing a Guaranteed Loan Approval and Maximum Loan Amount the method and process also enables the borrower to vary specifics within a loan they wish to initiate.
For a consumer and the Service Center the lending process is exponentially more efficient and less cumbersome than the standard onerous process of applying for a loan with traditional underwriting.
GUARANTEED LOAN APPROVAL VARIABLES
Notwithstanding the provision of a Guaranteed Loan Approval with Maximum amount the consumer, or vendor, may not require the Approved Loan Maximum Amount. The consumer or vendor may adjust the variables within the Guaranteed Approval.
The variables include the actual loan amount required (versus what has been approved as maximum), the interest rate (the interest rate will vary dependent on the consumer's self-declared and subsequently verified credit score/rating), the down-payment, the term (number of months), the sales tax, loan administration fees and total cost of financing.
Inventors Underwriting Comparison versus Conventional Underwriting Asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a vehicle repair loan is an example of an asset-based loan. Asset-based lending is usually done when the normal options of borrowing money is not possible. This is often because the consumer has exhausted other borrowing options or needs more immediate financing for immediate needs. Asset based loans (sub-prime loans) are also accompanied by higher interest rates, due to the inherent risks in the event of default.
In the event of a default the lender can recoup their funds by seizing and liquidating the assets tied to the loan.
Asset-based lending, once considered a last-resort finance option, has become a popular choice for companies and individuals that don't have the credit ratings, track record or patience to pursue more traditional financing sources.
Sub-Prime Automotive Finance Industry relies heavily on what is referred to as 'Asset Based Lending'. However, they only achieve partial 'Asset Based Lending'. As a result they are exposed to significant risk and suffer the inherent losses of potential revenues.
The method on the other hand, targets and achieves a real 100% plus, asset based lending model.
The following is an example and explanation of a typical sub-prime loan offered to consumers on the purchase of a vehicle:
All vehicles are categorized in one of 3 or 4 categories, Extra Clean, Clean, Average and Rough. The categories are defined by mileage and current or historical condition.
The category in which a vehicle is designated is the single point of reference used by sub-prime lenders to determine how much they are to finance on any given vehicle. The finance amount can be equal to the full retail value, or in many cases a lower amount if and when down payments are a stipulation of the loan approval.
Generally speaking sub-prime lenders like to see some customer equity in the vehicle.
"Retail Values" are determined by industry standards (market place pressure) and are generally 145% to 150% percent of "Wholesale Value".
This means if a wholesale value of a vehicle is determined to be $7000.00 the normal retail selling price allowed for a sub-prime consumer would be $7000.00 X 150%
=
$10.500.00. To this amount sub-prime lenders allow the dealer to add other "unsecured costs" such as 'Documentation Fees' to be retained by the dealer, ranging from $400.00 to as much as $1000.00. In addition most sub-prime auto lenders require and aftermarket power train warrantee in order to approve the loan. This invariably adds another $1200.00 to $1800.00 dollars to the total deal. Finally, the sales taxes are inputted into the transaction.
The loan structure is as follows:
Selling Price ....... $10.500.00 Documentation Fee ... $400.00 Extended Warrantee .. $1200.00 Sub Total ............ $12.100.00 Sales Tax (5%) (or more). $605.00 Total Due ........... $12.700.00 Down Payment (10%) .. $1050.00 (Industry standards are 10% of vehicle selling price as Down payment) Balance to Finance .. $11.650.00 ___________________________________________ Here is where typical sub-prime lending strays from true asset base lending.
They disregard a $7000.00 asset value to provide an $11.650.00 finance amount.
They have gone beyond "Asset-based loans that are 100% collateralized based on liquidation values" in the amount of $4650.00. It is the difference between asset value and finance amount.
"Over the six months through Jan 1 and September, 2015 more than $110 billion of auto loans have been originated to borrowers with credit scores below 660, the bottom cutoff for having a credit score generally considered "good," according to a report from the Federal Reserve Bank of New York. Of that sum, about $70 billion went to borrowers with credit scores below 620, scores that are considered "bad."
(Statistics supplied by Subprime Analytics Average Gross Dollar Loss (Before Recoveries) Average Net Dollar Loss (After Recoveries) .......... $8381.00 Average Default Rate (% of Loans Written Off) ........ $5410.00 Average Gross Dollar Loss Rate (% of Principal) ......... 31.41%
Average Net Dollar Loss Rate (% of Principal) ........ 35.75%
Average Recovery (% of Principal Charged Off) ........... 24.37%
It is important to note the "Principle" amount of the loan refers to the total amount due on the contract or the total amount the borrowers agreed to pay.
This means the real collection rate of typical automotive sub-prime lenders is the area of 75%.
In fact, Credit Acceptance, the largest sub-prime auto finance company in the world has had historical collection rates over a period of 20 plus years of about 73%.
As a publically traded company their financials are available on line.
HOW IS THE UNDERWRITING METHOD DIFFERENT?
The most important number mentioned above is $4650.00 Why? Because it consists OF UNSECURED (NON-COLLATERALIZED) RISK
CAPITAL
In other words, it is worth nothing to a lender. It has no value and it is that part of sub-prime lending amounts that is NOT asset based lending.
The method and processes of creating a guaranteed loan approval with maximum amount completely avoids the deployment t of risk capital that is not 100%
plus asset based secured The underwriting and Guaranteed Loan Approval and maximum amount model will, with no exceptions, only approve a fraction of the net fire sale real time value of an asset.
To further mitigate lender risk the underwriting will also use the lowest verified and current net asset value as the only point of reference in its underwriting, including using the lowest geographical pricing.
Specifically that means the example shown above with a "Wholesale Value" of $7000.00 will be valued by the system at Rough Book in the Ontario region, at $4500.00 .. NOT $7000.00.
In other words, Rough Book being $4500.00 maximum guaranteed loan amount would be capped at 75% of $4500.00 equaling $3375.00 on a vehicle which conventional lenders would lend $11,650.00.
Guaranteed Loan Approvals are structured such that payments exceed depreciation, starting at date of origination with a 25% pre-loan real equity advantage.
According to Edmons.com cars depreciate an average of 12% per year if they are purchased new, and if already used, the deprecation rate is slower.
Payment structure reduces amounts owing by 33% per year and payment amounts are, by design, affordable and in compliance with consumer protection legislations.
AUTOMATED GUARANTEED LOAN APPROVAL AND MAXIMUM AMOUNT
TECHNICAL FIELD
[0001] This relates to a system and method for issuing a written verifiable guaranteed confirmation of a loan approval.
BACKGROUND
[0002] Traditional loans are issued based on a consumer's credit profile.
Consumers with a poor credit profile are sometimes referred to as subprime credit consumers, and often rely on alternative financing strategies, such as payday loans, title loan companies, etc. when they require financing. These alternative financing strategies have a high degree of risk, and are quite punitive to the consumer.
BRIEF DESCRIPTION OF THE DRAWINGS
[0003] These and other features will become more apparent from the following description in which reference is made to the appended drawings, the drawings are for the purpose of illustration only and are not intended to be in any way limiting, wherein:
FIG. 1 is a schematic view of a system for implementing a method of issuing a written verifiable confirmation of a guaranteed loan approval.
DETAILED DESCRIPTION
[0001] A method and system for providing a guaranteed loan approval and amount available for a passenger vehicle in need of a repair service or improvement will now be described with reference to FIG. 1. The method provides information to customers and /or vendors to determine the viability of financing for repair or improvement product and service to be provided. The method is particularly designed to be used with vehicles lawfully owned and registered to a rightful owner in Canada in which a registry of ownership is maintained, which facilitates using the article being repaired improved as collateral for the loan. It will be understood that other approaches to determining value and establishing collateral may also be used other than those discussed below when the article is something other than a passenger vehicle or something that does not have the same systems for determining ownership or estimating the value. In a preferred implementation, the method provides a secured, conservative guaranteed loan approval to pay for a repair or improvement product and service that presents very little risk to the lender.
[0002] A customer presents a vehicle to be repaired or improved with product and service to a repair service provider. In the discussion below, the article will be assumed to be a vehicle, and the repair service provider will be an auto repair company, and that analogous steps may be taken if the article is something other than a vehicle, and/or the service provider is something other than an auto repair company.
[0003] The identifying characteristics of the vehicle are electronically transmitted to a third-party lender terminal. While a service provider can transmit the identifying characteristics to the third-party lender, the identifying characteristics may be transmitted by the customer by determining the viability of required financing and prior to presenting the article to the repair service provider, and obtain a separate guaranteed pre-approved loan amount, as discussed below. It will be appreciated that the repair service provider will need to verify the identifying characteristics of the article prior to proceeding with the repair service by utilizing the same method and process as done by the consumer.
[0004] The identifying characteristics are those that may be present in a commercial database that estimates the value of the article. The identifying characteristics will generally include the year, make, model, style, mileage, features, and condition of the vehicle. As will be understood from the discussion below, the condition of the vehicle may not be used, as the process calculates the value based on a "poor"
condition in order to be conservative.
Lenders use a risk model to determine the price of a loan for each individual applicant.
They consider all of the data and information described above to assess how likely it is that the customer will meet all of the loan repayments. To do this they also look at various key characteristics ¨ for example if they own their own home since experience shows that the risk of default is lower, and therefore the APR (Annual Percentage Rate) offered will likely be lower.
At the other end of the scale, applicants who display signs of a transient nature, for example renting at a number of different addresses over the past few years, are inherently riskier and therefore the cost of their loan will be higher or declined.
Each loan application is meticulously underwritten by underwriting professionals. If they cannot establish creditworthiness or that the loan is affordable then they will be unable to accept the loan application. Ultimately the approval of a loan becomes a subjective decision to a significant degree, requiring extensive personnel experience and specific application review.
A conventional Loan Application is a labor intensive and time consuming process for the lender and an onerous and anxiety filled task for a loan applicant.
"Asset-based Underwriting" Process for Subprime Consumers Needing Financing For Auto Repair or Improvements Consumer Credit:
Finance companies make lending or underwriting decisions to consumers based on a consumer's credit profile or score.
There are several credit scoring software companies that track consumer's payment history, debt load etc. to determine a consumers credit score.
The leading credit scoring company is "FICO" founded in 1956 by software engineers Bill Fair and Earl Isaac (Fair Isaac Company of FICO). FICO is a NYSE company, has 100's of patents and pending patents protecting their proprietary software and generate almost a billion dollar annually selling credit score data to lenders who make trillions of loans based on FICO credit scores Based on their credit score consumers generally have two types of credit profiles 1) prime credit and 2) subprime credit Prime credit consumers can access traditional financing from banks, credit card companies, car manufacturers, etc.
Subprime Credit Consumers:
Subprime Credit Consumers (or Credit-challenged consumers) cannot access traditional financing and must rely on alternative financing companies, many of which are predatory lenders (payday loans, title loan companies, etc.) charging interest rates ranging from 60% to 750%.
Credit-challenged consumers are a large demographic representing 56% of all consumers. 88% of credit applications from sub-prime credit consumers are declined Subprime Credit Car Purchase Lending -- Car loans to subprime consumers is a large business. Approximately 35% of all used cars sold are to subprime credit consumers who need financing.
Problems for Subprime Consumers and Vehicle Repair Service Centers:
A major trend in recent years in the auto repair industry is as cars have become more technology advanced car vehicle repairs have become more expensive with a major repair costing in the $2,000 to $4,000 range Subprime consumers own the majority of older cars, with most out of warranty.
A
serious problem for these consumers is a major car repair. Most times it is unexpected and can cost $1,000's of dollars. A recent survey showed that over 60% of consumers have less than $1,000 in the bank.
Subprime consumers not being able to afford a major vehicle repair is also a large problem for auto repair service centers. Approximately 33% of quotes written are not acted on because the consumer cannot afford the repair and does not have access to financing. Unacted upon repair quotes cost the auto repair industry billions of dollars annually in Canada alone.
Automotive Repair Service Centers in Canada operate at 55% of capacity. 50% of required work not being done is due to consumers being unable to afford the cost and inability to finance the required work.
Unlike the automobile sales industry, where all vendors of automobile have an in-house financing provision via 3rd party lenders, the auto repair industry has no such provision. The repair industry is not as mature or sophisticated, therefore are unable to manage consumer financing at point of sale as the auto sale industry does. To incorporate point of sale financing to the auto repair industry it is necessary to automate the entire process as much as possible, and in such a manner as results and processes are completed with minimal work required by the service center. The most time consuming process obtaining financing is the application and approval process.
Whereas financing and purchasing of an automobile is usually a decision and action of choice, the repair of an expensive auto repair is usually unexpected and requires immediate decision making and action. An automated underwriting method and process is crucial to expediting the required decisions and actions under the duress resulting from lack of time and money.
Additionally is important to note the dollar volume of financing provided in the used auto sales industry makes the employment of full time finance managers a viable option. Where the auto dealer may originate $20,000.00 to over $100,000.00 a day in 3rd party loans, a very large and successful repair service center may only average $500.00 to $1500.00 a day in loan originations. It is therefore crucial to provide fast efficient automated systems and methods to minimize administration costs normally associated with having an in-house finance manager.
PRIOR ART:
There are over 49,000 financial services providers in Canada and a proportional number in the United States. None of them will provide a written Guaranteed Loan Approval, including a Maximum Loan Amount without various and sometimes significant amounts of personal information on the prospective borrower.
It is common to see signing and advertising claiming such things as "No Credit Checks", "Guaranteed Approvals", "Everyone Approved", etc. However, in all cases these offerings are subject to extensive consumer information from which the lender will base numerous subsequent stipulations for the loan to actually be approved. Many of the stipulations are onerous and punitive the consumer simply cannot comply in order to actually obtain the approval.
The applicant has found Prior Art that is similar in that some Loan Underwriting methods are automated; however, all do require various amounts pf personal information on the potential borrower prior to issuing loan approval.
See below:
Loan underwriting system and method Automates the loan making decision upon receipt of borrower information Mortgage loan system and method US 20070067234 Al Requires borrower's personal information Method and system for loan organization and underwriting US 20080103963 Al Requires borrower's personal information / loan application SYSTEM AND METHOD FOR ONLINE EVALUATION AND UNDERWRITING OF
LOAN PRODUCTS
IPC8 Class: AGO6Q4002F1 Requires borrower's personal information / loan application Systems and methods for underwriting loans Requires borrower's personal information / loan application Automated loan approval system Requires borrower's personal information / loan application Network based loan approval and document origination system US 20010032178 Al Requires borrower's personal information / loan application System and method for real time loan approval Requires borrower's personal information / loan application System and method for online evaluation and underwriting of loan products US 20160042451 Al Requires borrower's personal information / loan application A search of the Canadian Intellectual Property office's Patent Data Base of automated loan underwriting system, automated loan approvals, loan approval underwriting, loan underwriting indicate no patents were found matching the query Results of Search in US Patents Text Collection db for:
"automated loan underwriting" AND "automated loan approvals": 0 patents.
Results of Search in US Patents Text Collection db for:
ABSTr guaranteed loan approvals": 0 patents.
No patents have matched your query Description of Asset-Based Underwriting Process and Method for Subprime Credit Consumers Applicable to Auto Repair and Improvements Financing.
Enables the consumer, or vendor, to obtain the Guaranteed Approved Loan and Maximum Amount independent of the lender's active involvement.
Underwriting method and processes will not require a 'Loan Application', will not issue a subsequent 'Approval', will not do a 'Credit Check', will not require an 'Income Verification', will not require 'Employment Verification', will not require a 'Residence Verification' or any other conventional stipulation to issue a Guaranteed Loan Approval and Maximum Loan Amount.
Normally this seems quite counter-intuitive and even reckless lending. It is counter-intuitive, but it is not risky. The method and process creates a responsible loan approval model which by-passes all of the conventional underwriting and lending practices.
How is this accomplished?
Establishment of relationships with the automotive wholesale sales industry across the nation. Data is accessed nation-wide on a base 24/7/365 basis and updated daily.
Utilizing proprietary software created results in providing a method for consumers and vendors to confirm a Guaranteed Approved Loan and Amount available on any given passenger vehicle on any given day. It is a simple 20 second process done on line via the lender's website.
How a Guaranteed Loan Approval and Maximum Loan Amount is Created On the Lender's web portal the user enters the following information only:
YEAR... ... limited to 13 model years or newer MAKE
MODEL
STYLE ....options are automatically presented for consumer choice TRIM ....... options are automatically presented for consumer choice KILOMETERS... .limited to 250.000 kilometers or less OPTIONS.. ..options are automatically presented for consumer choice OWNERSHIP... .confirmation of lawfully owned and lawfully registered ownership HISTORY ......... confirmation the owned vehicle is not an accident write off or branded as a write-off re-build.
The user clicks on "Submit" and is instantly presented with a written guarantee of his/her Guaranteed Loan Approval and maximum amount.
Note* No personal information is required.
The 'Maximum Guaranteed Loan Approval and Maximum Amount' is automatically calculated as being a pre- determined percentage of the very lowest current wholesale pricing on the very day the information is inputted, 24/7/365 Reviewing the industry valuations grid there are four (4) potential categories for values:
Extra-Clean Clean Average Rough New YEAR MAKE MODEL TRIM
STYLE __________ Used' 2010 2d1 Cadillac _III Escalade 2:11 ESV
Select Retail Add/Deducts Residuals Industry Extra Clean Clean Average Rough Base Wholesale Add/Deduct(+/-KM Adjust(-) 0 0 Total Wholesale Ontario Region I Kilometres I 13500( Term I Annual Kilometres I Ca Lutate Guaranteed Loan Approval and Maximum Loan Amount valuation is always based on 'Rough Book' ( the lowest pricing), and additionally, always based on the market area with the lowest prevailing market prices, which in Canada, is Ontario.
With 'Guaranteed Loan Approval and Maximum Loan Amount' information in hand the consumer can go to any Auto Service Center of their choice and arrange to have the work done and financed by the lender.
A Service Center may also initiate the 'Guaranteed Loan Approval and Maximum Amount' confirmation at point of sale with a "walk-in" customer.
In addition to providing a Guaranteed Loan Approval and Maximum Loan Amount the method and process also enables the borrower to vary specifics within a loan they wish to initiate.
For a consumer and the Service Center the lending process is exponentially more efficient and less cumbersome than the standard onerous process of applying for a loan with traditional underwriting.
GUARANTEED LOAN APPROVAL VARIABLES
Notwithstanding the provision of a Guaranteed Loan Approval with Maximum amount the consumer, or vendor, may not require the Approved Loan Maximum Amount. The consumer or vendor may adjust the variables within the Guaranteed Approval.
The variables include the actual loan amount required (versus what has been approved as maximum), the interest rate (the interest rate will vary dependent on the consumer's self-declared and subsequently verified credit score/rating), the down-payment, the term (number of months), the sales tax, loan administration fees and total cost of financing.
Inventors Underwriting Comparison versus Conventional Underwriting Asset-based lending is any kind of lending secured by an asset. This means, if the loan is not repaid, the asset is taken. In this sense, a vehicle repair loan is an example of an asset-based loan. Asset-based lending is usually done when the normal options of borrowing money is not possible. This is often because the consumer has exhausted other borrowing options or needs more immediate financing for immediate needs. Asset based loans (sub-prime loans) are also accompanied by higher interest rates, due to the inherent risks in the event of default.
In the event of a default the lender can recoup their funds by seizing and liquidating the assets tied to the loan.
Asset-based lending, once considered a last-resort finance option, has become a popular choice for companies and individuals that don't have the credit ratings, track record or patience to pursue more traditional financing sources.
Sub-Prime Automotive Finance Industry relies heavily on what is referred to as 'Asset Based Lending'. However, they only achieve partial 'Asset Based Lending'. As a result they are exposed to significant risk and suffer the inherent losses of potential revenues.
The method on the other hand, targets and achieves a real 100% plus, asset based lending model.
The following is an example and explanation of a typical sub-prime loan offered to consumers on the purchase of a vehicle:
All vehicles are categorized in one of 3 or 4 categories, Extra Clean, Clean, Average and Rough. The categories are defined by mileage and current or historical condition.
The category in which a vehicle is designated is the single point of reference used by sub-prime lenders to determine how much they are to finance on any given vehicle. The finance amount can be equal to the full retail value, or in many cases a lower amount if and when down payments are a stipulation of the loan approval.
Generally speaking sub-prime lenders like to see some customer equity in the vehicle.
"Retail Values" are determined by industry standards (market place pressure) and are generally 145% to 150% percent of "Wholesale Value".
This means if a wholesale value of a vehicle is determined to be $7000.00 the normal retail selling price allowed for a sub-prime consumer would be $7000.00 X 150%
=
$10.500.00. To this amount sub-prime lenders allow the dealer to add other "unsecured costs" such as 'Documentation Fees' to be retained by the dealer, ranging from $400.00 to as much as $1000.00. In addition most sub-prime auto lenders require and aftermarket power train warrantee in order to approve the loan. This invariably adds another $1200.00 to $1800.00 dollars to the total deal. Finally, the sales taxes are inputted into the transaction.
The loan structure is as follows:
Selling Price ....... $10.500.00 Documentation Fee ... $400.00 Extended Warrantee .. $1200.00 Sub Total ............ $12.100.00 Sales Tax (5%) (or more). $605.00 Total Due ........... $12.700.00 Down Payment (10%) .. $1050.00 (Industry standards are 10% of vehicle selling price as Down payment) Balance to Finance .. $11.650.00 ___________________________________________ Here is where typical sub-prime lending strays from true asset base lending.
They disregard a $7000.00 asset value to provide an $11.650.00 finance amount.
They have gone beyond "Asset-based loans that are 100% collateralized based on liquidation values" in the amount of $4650.00. It is the difference between asset value and finance amount.
"Over the six months through Jan 1 and September, 2015 more than $110 billion of auto loans have been originated to borrowers with credit scores below 660, the bottom cutoff for having a credit score generally considered "good," according to a report from the Federal Reserve Bank of New York. Of that sum, about $70 billion went to borrowers with credit scores below 620, scores that are considered "bad."
(Statistics supplied by Subprime Analytics Average Gross Dollar Loss (Before Recoveries) Average Net Dollar Loss (After Recoveries) .......... $8381.00 Average Default Rate (% of Loans Written Off) ........ $5410.00 Average Gross Dollar Loss Rate (% of Principal) ......... 31.41%
Average Net Dollar Loss Rate (% of Principal) ........ 35.75%
Average Recovery (% of Principal Charged Off) ........... 24.37%
It is important to note the "Principle" amount of the loan refers to the total amount due on the contract or the total amount the borrowers agreed to pay.
This means the real collection rate of typical automotive sub-prime lenders is the area of 75%.
In fact, Credit Acceptance, the largest sub-prime auto finance company in the world has had historical collection rates over a period of 20 plus years of about 73%.
As a publically traded company their financials are available on line.
HOW IS THE UNDERWRITING METHOD DIFFERENT?
The most important number mentioned above is $4650.00 Why? Because it consists OF UNSECURED (NON-COLLATERALIZED) RISK
CAPITAL
In other words, it is worth nothing to a lender. It has no value and it is that part of sub-prime lending amounts that is NOT asset based lending.
The method and processes of creating a guaranteed loan approval with maximum amount completely avoids the deployment t of risk capital that is not 100%
plus asset based secured The underwriting and Guaranteed Loan Approval and maximum amount model will, with no exceptions, only approve a fraction of the net fire sale real time value of an asset.
To further mitigate lender risk the underwriting will also use the lowest verified and current net asset value as the only point of reference in its underwriting, including using the lowest geographical pricing.
Specifically that means the example shown above with a "Wholesale Value" of $7000.00 will be valued by the system at Rough Book in the Ontario region, at $4500.00 .. NOT $7000.00.
In other words, Rough Book being $4500.00 maximum guaranteed loan amount would be capped at 75% of $4500.00 equaling $3375.00 on a vehicle which conventional lenders would lend $11,650.00.
Guaranteed Loan Approvals are structured such that payments exceed depreciation, starting at date of origination with a 25% pre-loan real equity advantage.
According to Edmons.com cars depreciate an average of 12% per year if they are purchased new, and if already used, the deprecation rate is slower.
Payment structure reduces amounts owing by 33% per year and payment amounts are, by design, affordable and in compliance with consumer protection legislations.
AUTOMATED GUARANTEED LOAN APPROVAL AND MAXIMUM AMOUNT
TECHNICAL FIELD
[0001] This relates to a system and method for issuing a written verifiable guaranteed confirmation of a loan approval.
BACKGROUND
[0002] Traditional loans are issued based on a consumer's credit profile.
Consumers with a poor credit profile are sometimes referred to as subprime credit consumers, and often rely on alternative financing strategies, such as payday loans, title loan companies, etc. when they require financing. These alternative financing strategies have a high degree of risk, and are quite punitive to the consumer.
BRIEF DESCRIPTION OF THE DRAWINGS
[0003] These and other features will become more apparent from the following description in which reference is made to the appended drawings, the drawings are for the purpose of illustration only and are not intended to be in any way limiting, wherein:
FIG. 1 is a schematic view of a system for implementing a method of issuing a written verifiable confirmation of a guaranteed loan approval.
DETAILED DESCRIPTION
[0001] A method and system for providing a guaranteed loan approval and amount available for a passenger vehicle in need of a repair service or improvement will now be described with reference to FIG. 1. The method provides information to customers and /or vendors to determine the viability of financing for repair or improvement product and service to be provided. The method is particularly designed to be used with vehicles lawfully owned and registered to a rightful owner in Canada in which a registry of ownership is maintained, which facilitates using the article being repaired improved as collateral for the loan. It will be understood that other approaches to determining value and establishing collateral may also be used other than those discussed below when the article is something other than a passenger vehicle or something that does not have the same systems for determining ownership or estimating the value. In a preferred implementation, the method provides a secured, conservative guaranteed loan approval to pay for a repair or improvement product and service that presents very little risk to the lender.
[0002] A customer presents a vehicle to be repaired or improved with product and service to a repair service provider. In the discussion below, the article will be assumed to be a vehicle, and the repair service provider will be an auto repair company, and that analogous steps may be taken if the article is something other than a vehicle, and/or the service provider is something other than an auto repair company.
[0003] The identifying characteristics of the vehicle are electronically transmitted to a third-party lender terminal. While a service provider can transmit the identifying characteristics to the third-party lender, the identifying characteristics may be transmitted by the customer by determining the viability of required financing and prior to presenting the article to the repair service provider, and obtain a separate guaranteed pre-approved loan amount, as discussed below. It will be appreciated that the repair service provider will need to verify the identifying characteristics of the article prior to proceeding with the repair service by utilizing the same method and process as done by the consumer.
[0004] The identifying characteristics are those that may be present in a commercial database that estimates the value of the article. The identifying characteristics will generally include the year, make, model, style, mileage, features, and condition of the vehicle. As will be understood from the discussion below, the condition of the vehicle may not be used, as the process calculates the value based on a "poor"
condition in order to be conservative.
[0005] Based on the identifying characteristics, the processor in the third party lender terminal will electronically search a computer database for an estimated current and future market value of the article. In terms of a vehicle, the database may be a comprehensive database with estimated vehicle values, such as, for example, the Canadian Black Book database or other comparable database. Based on the estimated market value of the article, the processor calculates a maximum loan amount.
The maximum loan amount will be calculated based on a predetermined formula, such as a percentage, of the estimated market value. In one example, the maximum loan amount may be 75% of the estimated wholesale value of the vehicle in poor condition, regardless of the actual condition of the vehicle. While 75% is given as an example, the actual percentage may be decided based on the preferences of the lender and the specific circumstances. Furthermore the formula may be more complex and take into account other objecting factors, such as a sliding scale based on the overall value of the vehicle or certain characteristics of the vehicle that may affect the ability to liquidate the vehicle, for example a vehicle branded as a write off or major accident repair As will be understood, the risk of the lender against default is reduced by estimating the value of the vehicle as the lowest possible amount, and then approving a maximum loan amount that is less than this. As such, should the customer default on the loan, the lender will be in a much better position to recover the unpaid portion of the loan by recovering and liquidating the vehicle. Furthermore, if the replacement cost was about the same as, or less than, the repair costs, it is more likely that the customer would simply choose to replace the vehicle, rather than repair the vehicle.
The maximum loan amount will be calculated based on a predetermined formula, such as a percentage, of the estimated market value. In one example, the maximum loan amount may be 75% of the estimated wholesale value of the vehicle in poor condition, regardless of the actual condition of the vehicle. While 75% is given as an example, the actual percentage may be decided based on the preferences of the lender and the specific circumstances. Furthermore the formula may be more complex and take into account other objecting factors, such as a sliding scale based on the overall value of the vehicle or certain characteristics of the vehicle that may affect the ability to liquidate the vehicle, for example a vehicle branded as a write off or major accident repair As will be understood, the risk of the lender against default is reduced by estimating the value of the vehicle as the lowest possible amount, and then approving a maximum loan amount that is less than this. As such, should the customer default on the loan, the lender will be in a much better position to recover the unpaid portion of the loan by recovering and liquidating the vehicle. Furthermore, if the replacement cost was about the same as, or less than, the repair costs, it is more likely that the customer would simply choose to replace the vehicle, rather than repair the vehicle.
[0006] Once calculated, the maximum loan amount is provided to the repair service provider and/or the consumer. If the identifying characteristics were submitted by the repair service provider, or consumer, the amount will be transmitted electronically to the computer terminal repair service provider or consumer. If the identifying characteristics were submitted by the customer, the repair service provider may be presented with a certificate provided to the customer that confirms the maximum guaranteed approval of loan amount. To secure this process, the certificate may be assigned a unique identification number, a bar code, a QR code, stored by phone number, may be accessible by username and password, or the like, that can be used by the repair service provider to access the identifying characteristics of the article and the maximum loan amount from the loan provider in order to confirm the certificate applies to the article being presented.
[0007] The maximum loan amount is then compared to the repair cost as estimated by the repair service provider. If the repair cost is less than the maximum loan amount, a loan agreement will be issued to the customer to cover the cost of the repairs, using the article as collateral for the loan agreement. This will generally be secured by registering a suitable security against the vehicle. This allows, for example, a non-possessory lien, allows the lien to be assigned to others, and allows the lien to be good for 3 years. In addition, the repair lien will have priority over all other interested in the vehicle. Using this registration scheme, the lien or right to register the lien may be assigned from the repair service provider to the lender, the passenger vehicle may be released to the customer after repairs have been completed, and the customer may have up to 3 years to repay the loan, all while allowing the loan to be secured using the vehicle as collateral. As the process is intended to be electronic and automatic, the loan agreement will be issued based exclusively on the estimated value of the passenger vehicle and a verification step that consists of verifying that the customer is the registered owner of the vehicle, thus is authorized by to enter into the loan agreement. The process is designed such that no other steps are required. By doing so, if the customer is able to show that they are able to allow a security interest to be registered with respect to the article, they are automatically approved for the loan, up to the maximum value of the loan, as discussed above.
[0008] Once the agreement has been entered into, the repair service proceeds, and once the lender has been notified that the repair service has been completed, and received authorization for the lien, the repair cost can then be paid out to the service provider.
[0009] In some circumstances, the customer may pay a portion of the repair cost directly to the repair service provider. In most circumstances, this will not affect the calculations performed by the loan provider, unless it is desired to use this as a factor to be used in automatically calculating the loan amount. However, this amount may be used to reduce the repair or improvement finance amount prior to comparing the amount to the maximum loan amount.
[0010] In some circumstances, the cost of the repair or improvement service may change as the service is performed. In this case, the loan repair cost discussed above may include an estimated repair cost and an actual repair cost. In this situation, the estimated repair cost will be compared to the maximum loan amount prior to the service, and, depending on the terms of the agreement with the customer, the actual repair cost may be paid out to the service provider after the repair service is completed.
However, the amount paid to the service provider by the lender will not be more than the guaranteed loan approval maximum loan amount.
However, the amount paid to the service provider by the lender will not be more than the guaranteed loan approval maximum loan amount.
[0011] An example of a system used for providing a guaranteed financing approval with a maximum loan amount stipulated repair or product improvement services is shown in FIG. 1 and includes a computer network 10, such as the internet, which connects a service provider terminal 12 and a loan provider terminal 14. Loan provider terminal 14 has a processor 16 and has access to a database 18, shown as a third party commercial database that has estimated values of articles based on identifying characteristics. The third party commercial data base aggregator is connected to numerous industry data bases 24. It will be understood that the database of values may also be maintained by the loan provider's terminal, although in most circumstances it will be more efficient to use a commercially available database. Furthermore, while loan provider terminal 14 is shown as being connected to database via the internet
[0012] In another example, the computer network may also connect a customer terminal 22 to the loan provider terminal, which allows a customer to obtain a guaranteed approved loan amount separately from the repair service provider.
In this case, the processor on the loan provider terminal would cause the approved loan amount to be saved using a unique identifier that can then be accessed by the service provider terminal to finalize the loan.
In this case, the processor on the loan provider terminal would cause the approved loan amount to be saved using a unique identifier that can then be accessed by the service provider terminal to finalize the loan.
[0013] Each terminal discussed above may be a general purpose computer, or a purpose built computer processing device, with the appropriate input and output connections, including user interfaces, network connections, etc.
Each terminal generally has a processor and a suitable type and amount of memory for performing its defined function. Each terminal Preferably, the computer network is the internet, but may also involve direct computer connections
Each terminal generally has a processor and a suitable type and amount of memory for performing its defined function. Each terminal Preferably, the computer network is the internet, but may also involve direct computer connections
[0014] Loan provider terminal 14 is programmed to perform the necessary steps described above, such as to use a predetermined loan calculation formula to calculate an approved loan amount that is less than the estimated value of the article;
to transmitting authorization to issue a loan agreement to the customer for an amount that is less than or equal to the guaranteed approved maximum loan amount and that uses the article as collateral.
to transmitting authorization to issue a loan agreement to the customer for an amount that is less than or equal to the guaranteed approved maximum loan amount and that uses the article as collateral.
[0015] Loan provider terminal 14 is limited in the aspects that are reviewed in issuing the guaranteed loan approval and maximum amount, just as the service provider is limited in the aspects or characteristics of the customer that are reviewed prior to authorizing and entering into a loan agreement, respectively. In particular, the loan provider and the service provider look exclusively at the right of the customer to enter into a loan agreement that uses the article as collateral, and the identifying characteristics of the article being repaired.
[0016] The loan provider terminal 14 will also enable the consumer and/or repair service center to vary specifics within the loan itself, such as interest rates, term, down payment, amount to be borrowed, thereby enabling the consumer and or/ service center to structure the terms of the loan to meet the determined requirements of the consumer and /or the service center.
[0017] As can be seen, the method and system described above provides an automated system for issuing a guaranteed loan approval and maximum loan amount in a fast, efficient, and predictable manner. Of note, while the loan agreement may ask for identification information, such as proof of ownership of the vehicle, and contact information for the loan agreement, the system does not ask for any details that relate to the credit-worthiness of the customer. To obtain a guaranteed loan approval the consumer is not required to provide any personal information. As such, there is no need for any intervention, discretion, or review by an individual, or any benchmarks or criteria that must be satisfied prior to issuing the loan.
[0018] The loan that has been entered into as discussed above is registered in accordance with a law that allows security interests to be entered that are transferrable to third parties; that do not require possession; that take priority over other security interests; and that allow for an extended period of time to repay the repair loan. The features described herein may be combined together in any reasonable combination as will be recognized by those skilled in the art.
[0019]
In this patent document, the word "comprising" is used in its non-limiting sense to mean that items following the word are included, but items not specifically mentioned are not excluded. A reference to an element by the indefinite article "a" does not exclude the possibility that more than one of the elements is present, unless the context clearly requires that there be one and only one of the elements.
The scope of the following claims should not be limited by the preferred embodiments set forth in the examples above and in the drawings, but should be given the broadest interpretation consistent with the description
In this patent document, the word "comprising" is used in its non-limiting sense to mean that items following the word are included, but items not specifically mentioned are not excluded. A reference to an element by the indefinite article "a" does not exclude the possibility that more than one of the elements is present, unless the context clearly requires that there be one and only one of the elements.
The scope of the following claims should not be limited by the preferred embodiments set forth in the examples above and in the drawings, but should be given the broadest interpretation consistent with the description
Claims
A method and process of Automated Loan Underwriting to provide Guaranteed Loan Approvals with specific dollar values and no requirement for any consumer personal information, while simultaneously significantly mitigating risk for the lender beyond normal industry standards. The method and process will also include complete loan profiles with interactive loan variables.
Field of Invention The method and processes are related to financial services whereby financing is provided to consumers who would not normally be able to obtain financing for repairing or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for the decision making process of obtaining required Guaranteed Loan Approvals, with Maximum Loan Amounts stipulated, to proceed with decision making regarding financing for Passenger Vehicle mechanical repair, or improvement. Consumers will not have to present themselves, or any personal information, to a vendor or lender to obtain a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete departure from all normal credit issuing methods and processes. The consumer remains completely anonymous as they acquire the Guaranteed Loan Approval with a Maximum Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount is valid for use by the lawfully registered owner of the vehicle BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories are able to easily make lending decisions based primarily on an applicant's credit score.
However, even then, lenders do require substantial personal information as well.
The credit-challenged demographic in Canada is represented by the following statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maggiemcarath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency/#2715e4857a0b16466d896dde (c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack reported that annually 600,000 non-prime consumers apply for an automotive related loan annually, but 88% are declined.
Field of Invention The method and processes are related to financial services whereby financing is provided to consumers who would not normally be able to obtain financing for repairing or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for the decision making process of obtaining required Guaranteed Loan Approvals, with Maximum Loan Amounts stipulated, to proceed with decision making regarding financing for Passenger Vehicle mechanical repair, or improvement. Consumers will not have to present themselves, or any personal information, to a vendor or lender to obtain a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete departure from all normal credit issuing methods and processes. The consumer remains completely anonymous as they acquire the Guaranteed Loan Approval with a Maximum Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount is valid for use by the lawfully registered owner of the vehicle BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories are able to easily make lending decisions based primarily on an applicant's credit score.
However, even then, lenders do require substantial personal information as well.
The credit-challenged demographic in Canada is represented by the following statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maggiemcarath/2016/01/06/63-of-americans-dont-have-enough-savings-to-cover-a-500-emergency/#2715e4857a0b16466d896dde (c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack reported that annually 600,000 non-prime consumers apply for an automotive related loan annually, but 88% are declined.
Priority Applications (1)
| Application Number | Priority Date | Filing Date | Title |
|---|---|---|---|
| CA2955335A CA2955335A1 (en) | 2017-01-16 | 2017-01-16 | Automated loan underwriting |
Applications Claiming Priority (1)
| Application Number | Priority Date | Filing Date | Title |
|---|---|---|---|
| CA2955335A CA2955335A1 (en) | 2017-01-16 | 2017-01-16 | Automated loan underwriting |
Publications (1)
| Publication Number | Publication Date |
|---|---|
| CA2955335A1 true CA2955335A1 (en) | 2018-07-16 |
Family
ID=62904793
Family Applications (1)
| Application Number | Title | Priority Date | Filing Date |
|---|---|---|---|
| CA2955335A Abandoned CA2955335A1 (en) | 2017-01-16 | 2017-01-16 | Automated loan underwriting |
Country Status (1)
| Country | Link |
|---|---|
| CA (1) | CA2955335A1 (en) |
Cited By (2)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| CN110111208A (en) * | 2019-04-15 | 2019-08-09 | 深圳壹账通智能科技有限公司 | Declaration form data processing method, device, computer equipment and storage medium |
| US20210201401A1 (en) * | 2019-12-31 | 2021-07-01 | Miracle Sheppard | Lending and collecting method and system |
-
2017
- 2017-01-16 CA CA2955335A patent/CA2955335A1/en not_active Abandoned
Cited By (2)
| Publication number | Priority date | Publication date | Assignee | Title |
|---|---|---|---|---|
| CN110111208A (en) * | 2019-04-15 | 2019-08-09 | 深圳壹账通智能科技有限公司 | Declaration form data processing method, device, computer equipment and storage medium |
| US20210201401A1 (en) * | 2019-12-31 | 2021-07-01 | Miracle Sheppard | Lending and collecting method and system |
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| Date | Code | Title | Description |
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| FZDE | Discontinued |
Effective date: 20230411 |