How Digitization is Transforming the Online Lending Landscape
A research study of more than 200 banks by the American Bankers Association (ABA) in 2018 found that 71% of banks showed interest in partnering with third-party digital platforms to process consumer loans The finance sector, just like any other consumer-facing business, is undergoing rapid changes. Currently, the way most banks and other financial institutions are lending out money is based mainly on the presence of digital systems and loan management software.
Digital lending is continuously proving to be a great way of reaching individuals who in the past have not been able to access financial assistance. Tech giants like Amazon and WeChat are continuing to play a significant role in the transformation of digital lending. Other platforms include KoPo KoPo which is based in Kenya and Konfio based in Mexico. For all these platforms, the primary objective is to offer customers loans that are faster and more cost effective.
Here are some of the changes brought by digital transformation in online lending:
Faster Loan Processing
The availability of online lending platforms is arguably one of the best ways to save on time. Unlike traditional loans, applying for online loans is so much easier as all borrowers have to do is visit an online lending website and make comparisons among different lenders. Once you find the best deal, you fill in the required information and wait for the response, which could take as little time as 24 hours.
With online lending, borrowers can track the status of their loans and their credit scores as the process is fully automated. Digital lending platforms ensure that borrowers comply with the set standards and speed up the loan processing process. In case of an emergency, you can apply for payday loans with bad credit online which are quite easy to acquire.
Online lending websites come in handy as they let you make comparisons of different loan offers at the same time. Usually, with digital lending, financial institutions and private firms can have different lenders register on their platforms and set aside criteria for loan release. So, the lenders can communicate directly with the borrowers and track their credit scores.
Since the borrowers can make a comparison, they can choose the lenders with the most favorable interest rates and terms. Another great merit is in case you do not qualify for bank loans due to strict guidelines and need cash immediately, online lending is a great way to go.
Lower Eligibility Criteria
Getting your loan approved from an online lender is much easier than getting it from a bank. To get a bank loan, there are many procedures and qualifications to be met to get the loan approved. For people in the low-income bracket, it becomes even more challenging to get the loan. People with poor credit scores cannot be eligible for bank loans, unlike online loans.
With online borrowing, you can get loans despite how low your income is or how bad your credit score is. Too many insights for your credit report can impact negatively on your credit score and thus borrowing online can help you avoid this. To increase your eligibility for online loans, you can connect your social media profile to your account on the platform you are borrowing from.
Since the digital lending process is fully automated, once you make payments, it automatically updates on the lender’s platform. Immediately, an automatic message is sent to the borrower to confirm the payment made.
The mode of payment chosen depends on your agreement with the lender and the terms on loan. It could be on a weekly, monthly or annual basis. Most loans are serviced on a monthly basis though.
Digitalization has brought numerous changes to the finance industry with borrowing and lending now being more of a service. Many advantages are being associated with online lending as its fast and cheaper. So why not go digital with your borrowing and lending?