The digital revolution is not novel, but it has significantly changed the lending industry. Now, lenders and banks do not use traditional ways when it comes to lending money. For instance, banks do not need you to be present in person if you want to open an account. You can submit an application form online, scan copies of documents and fulfil other associated formalities.
Likewise, online lenders do not have to accept your applications in person. You can submit them online. They quickly shortlist your applications and decide how much amount they should lend you. In brief, it is no wonder that technology is aimed at providing comfort.
How technology has made borrowing easier than ever
Here is how technology has made borrowing much easier now:
Increased loan accessibility
One of the greatest benefits of technology is that it ensures increased loan accessibility. Digital technology has made it convenient for borrowers to obtain the right deal that aligns with their financial goals. With traditional lending systems, it was never possible for lenders to run extensive assessments. They would follow basic assessments to gauge the risk involved. Unfortunately, this was not enough.
But now, with the help of technology, it has become much easier for lenders to carry out extensive risk assessment. They can accurately analyse financial information that you provide with the help of advanced algorithms. Lenders rely on AI to shortlist applications. This is how they manage to do it quickly.
AI has enabled lenders to shortlist eligible candidates. This reduces the risk of defaults, too. Borrowers who get rejected under the basic assessment criteria can find themselves approved for a loan when assessed by new approval criteria.
Subprime borrowers also struggled to get signed off on for a loan. Traditionally, subprime borrowers were never accepted. But now applying for bad credit loans from direct lenders is a cinch. As long as you can prove your repayment capacity, you will be able to qualify for a loan.
Technology has made lending practices fairer, which has a good impact on borrowers. Now they quickly access cash during emergencies without fearing that they will fall into an abyss of debt.
Reduced borrowing costs
Another advantage of technology is that it helps reduce borrowing costs. Digital lending processes are way cheaper than the traditional way of lending. No additional paperwork and no too much involvement of human beings, this reduces the cost of borrowing.
The cost of borrowing has also reduced because the entire process is done digitally, which means no staff are required. When operation overheads are reduced, the cost of borrowing also becomes reduced. Most of the steps that used to be performed manually in the past are now done automatically, which reduces the need for staff.
Almost all short-term loans are processed online. In fact, even if you are applying for larger business loans from direct lenders, you do not have to be physically present. Banks also process most of the applications online.
Improved customer choices
Technology has improved customer experience. Since most of the lenders provide their financial products online, borrowers can now compare their deals. Interest rates, APRs, repayment terms, and the total cost of the debt can be easily compared online. Various comparison websites are out there.
Online lending has brought transparency. Now you can easily check the registration details of a lender. You do not have to take them at their word because you can verify these details by checking the FCA Register. Borrowers are well aware of the registration and authenticity of a lender, and therefore, they will be less likely to be duped.
Since there are several lenders providing various types of short-term loans, the competition is high. This prompts lenders to charge lower interest rates. Even though your credit rating is not impressive, you can choose the most affordable deal through comparison.
When it is difficult for you to choose an appropriate lender, you can contact a broker. You do not have to do any research because the broker will introduce you to a lender who aligns with your needs. They tie up with a large panel of lenders, which makes it possible for you to contact the best lender.
Personalization
As the application is processed online, borrowers are now highly likely to receive personalised deals. Traditionally, personalised deals were not possible. As long as you could repay your debt, the approval was made, but the loan repayment terms were fixed. However, now the scenario has changed.
When you put in a loan application, advanced AI shortlists your applications. It thoroughly assesses your current financial condition and then proposes a repayment term. For instance, if you borrow £5,000, the repayment term will largely depend on your current financial condition. Monthly instalments will ensure that you do not struggle to repay your debt.
It is likely that the lender proposes a 12-month repayment term to you while only a 9-month repayment term to another borrower, despite the fact that you both borrowed the same amount of money.
New lending models
Technology has proposed new lending models, too. For instance, traditionally, only banks would provide financial products to borrowers. However, now things have changed. Now, if you cannot get approval from a bank, you can consider other alternatives, and they do not just include online lenders, but P2P lenders as well.
Technology provides opportunities for many people to come forward and lend money through online platforms. They can pool their money together with others and lend money to borrowers. Peer-to-peer lending has become possible with the help of technology.
The final word
Technology has made it much easier for borrowers to get money at affordable interest rates. Now they can compare deals and choose the best options for them. Further, the cost of borrowing is also less. Technology has also helped lenders to reduce their risks.
Now the decision is made after a perusal of credit scores and the financial conditions of borrowers. There is no doubt that technology has significantly improved the whole lending system.
