It has always been a
challenge to get loans from banks and other traditional lending institutions.
The lengthy credit underwriting process at these places makes it impossible for
individuals, small businesses, and entrepreneurs to get loans quickly for their
needs. This is because most of the work related to underwriting and loan
approval is done manually at banks and financial institutions. This increases
the operating costs and time consumed for sanctioning a loan.
Many digital lending
platforms have come up to address this situation. Their solutions and services
are extremely effective and help to make the credit underwriting process more
simple, swift, and transparent to the customers. Let us discuss some of the
benefits which a digital lender provides to its customers.
The use of alternative data
for the credit underwriting process
When you apply for loans
traditionally, the banks and other lending institutions will check your credit
score, income, and financial credit history. They will ascertain your
creditworthiness and loan repaying capacity according to these details. This
process is detrimental for those individuals and businesses who do not have a
long and positive financial credit history.
To lower this credit gap,
digital lenders have introduced the use of alternative data for the borrower's credit
underwriting process. In this process, machine learning models and artificial
intelligence algorithms are used to analyze the data points and other forms of
big data of the borrower. It can be anything, from the customer's e-commerce
shopping history, social media browsing data, online spending patterns, etc.
These alternative data are used by the digital lenders to check the borrower's creditworthiness.
Having a more effective loan
underwriting process
Digital lenders have been
able to reduce the time and cost of processing a loan through the use of
digital solutions which are faster, efficient, and more accurate than the
traditional underwriting methods. The use of alternative data, artificial
intelligence, and machine learning models have helped them to be ahead of
traditional lending channels.
Digitization of the loan
application process
One of the advantages of
getting a loan from digital lenders is that their whole application process is
digitized.
- The customer onboarding process is done online through
eKYC or video KYC methods. The loan applicant has to provide their basic
details and upload the photos or soft copies of the required
identification documents.
- The loan underwriting and approval process are done
online with the help of automated solutions used by digital lenders.
- The loan is sanctioned and the amount is paid to the
borrower via online payment channels. The amount gets credited directly
into the bank account of the loan applicant.
Providing more customized
loan options
Digital lenders are also
known for providing customizable and flexible loan options to their customers.
They analyze the details provided by the loan applicant and use various tools
to determine the best loan option for them. Thus their credit products are
designed to suit the requirements of the borrower.
These are the benefits
that you can experience if you choose to get loans from digital lenders.
