Technology has revolutionized the loan industry completely. About three decades ago, the process of getting loans from financial institutions was long and cumbersome. There were so many barriers that made it difficult for an average American to access a loan. Getting a loan from financial institutions was a privilege enjoyed by those in formal employment. But the rapid technological change has transformed the loan industry remarkably over the last decade. This has benefited not only the borrowers but also the lenders. And with technology getting better and competition getting stiffer by the day in the financial and lending industry, customers should expect even better things in the future. In this post, we will discuss three ways new tech in the loan industry will benefit consumers.
1. Getting a loan will be very simple and effortless
Technology has made getting a loan effortless and straightforward in recent years compared to the past. However, the current system still favors borrowers who have a great credit score. Customers who have good credit scores can access loans and credit cards with ease and the most favorable terms. On the other hand, customers with poor credit scores have minimal options for loan accessibility. Lenders willing to give them loans offer very unfavorable terms, including high-interest rates and short repayment periods.
Accessible to All
However, as technology in the lending industry continues getting better, loans with favorable terms will be accessible to more customers. This includes those with poor credit scores. Today, most lenders use a manual process to determine loan eligibility. However, experts suggest that the loan issuing process will be fully automated in the next coming years. This will facilitate faster and more accurate loan application processing. As a result, more people, including those with poor credit scores, can access loans with favorable terms.
It is projected that financial institutions will utilize more sophisticated technology to determine loan eligibility. This includes checking the borrower’s credit worthiness as opposed to their credit score. Technology will enable lenders to access a wide range of consumer data to determine whether an applicant is eligible to get a loan or not. Considering many factors rather than one factor means that more customers will have access to loans with favorable terms.
2. Better customer service
The quality of customer service that financial institutions offer to their clients will significantly improve with the adoption of new technology. For instance, today, most lenders have a predictable way of dealing with borrowers who miss making their payments on time. They start by sending the borrower reminder messages that become more pronounced with time. If that does not work, they move to the next level of calling you multiple times every day, reminding you of your default payments. Some even threaten to take unspecified actions.
Lenders have used this technique for decades, and experts say that it has not worked. Many of them suggest that it has made things worse. The number of loan defaulters in the US has nearly tripled over the last decade. This clearly shows that the technique used by lenders to compel borrowers to make payments is not practical. This method often ends up aggravating the problem as opposed to solving it. Most customers usually feel upset by multiple calls and threats that lenders use to make them repay their missed payments.
But new technology in the loan industry will make this depressing approach a thing of the past. Expert suggests that lenders will adopt a new technology focusing on non-invasive methods when dealing with loan defaulters. This new technology will allow lenders to create a more favorable environment for the customer. Borrowers will get a chance to explain why they have defaulted and make commitments when they are planning to resume making payments.
Lenders will rely more on technology to improve customer service quality that they offer to their clients. Customers will be happier because they will feel more appreciated by their lenders. As a result, the defaulting rate on payment will also reduce, which is also an excellent thing for lenders. With tech, lenders can use machine intelligence to estimate how much a defaulted borrower can repay and renegotiate settlement.
3. Faster loan processing and favorable repayment terms
Loans processing is still slow despite the millstones made in the loan industry over the years. New tech in the loan industry is set to fasten the loan processing time and give customers favorable loan repayment terms.
Use of Artificial Intelligence
According to experts, the loan industry is set to adopt a new technology that uses artificial intelligence. This will help them determine whether a borrower is eligible to get a loan or not. This technique will significantly shorten the loan processing process, which is currently very slow. Borrowers will be able to apply for loans such as mortgage online or via apps and have their requests processed within minutes. This is a big win for consumers, especially those applying for a mortgage that usually takes days to process.
Additionally, the loan repayment terms will be favorable to borrowers. Adopting the new tech will eliminate the use of human capital in handling the loan application process. Additionally, it will also reduce processing time, all of which will help make the loan cheaper. Machine intelligence considers many factors rather than the borrower’s credit score. As a result, borrowers will get loans that attract lower interest rates and longer repayment periods.
By leveraging new technology in the loan industry, customers will get better services from lenders. New tech will not only improve loan processing efficiency but will also make them more affordable. For a long time, financial institutions have been at the forefront of adopting new technology to improve service delivery. However, the tech set to be used in the next coming years will be much better in efficiency and customer service than today’s technology. Many great loan technologies have already been built and are in the advanced stage of testing. Once approved by relevant authorities, these new technologies will benefit customers.