Glossary
What is Loan origination?
Definition
Loan origination is the process of creating a loan: taking the application, recording the borrower's details and documents, agreeing terms, reviewing and approving the loan, and disbursing the funds. It ends at disbursement, when loan servicing begins.
Origination is judgement-heavy: it decides who gets credit and on what terms, and most credit losses trace back to decisions made here. A sound process captures the borrower and documents, chooses a loan product that fixes the interest method, fees and limits, previews the repayment schedule, and routes the loan through an approval workflow with a logged decision.
Loan origination software supports these steps but does not make the decision. In a loan management system, the application becomes the loan, so the same record carries into servicing without re-keying.
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