How beneficial are digital lenders for customers?

 

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.

1. 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.
2. The loan underwriting and approval process are done online with the help of automated solutions used by digital lenders.
3. 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.