It wasn’t too long ago that if you needed to borrow money, you had to book a meeting with a bank manager. Things progressed from there to telephone conversations, but these still were time-consuming and results were not instant.
Nowadays, fintech has transformed the lending industry.
It is now possible for anyone to find a short term loan direct lender through a quick Google search and receive an answer within minutes. In this article, we’re going to explore some of the ways that fintech has changed the lending process for the better.
1. Fast Approvals and Funding
The main thing that consumers have noticed is how much more quickly funding is approved and then placed into their bank accounts. Before this technology was available, it used to take weeks, or even months, to approve a loan. Now it can be done in a matter of minutes, with most lenders taking no more than 24 hours. Lenders who are able to provide a quick approval are those that are most sought after by consumers, with some willing to pay higher interest rates for the fast funds.
2. Peer to Peer Lending is More Commonplace
With peer to peer lending, investors are matched directly with borrowers through a lending platform. Borrowers can ask for money for anything from business expenses to home improvements, and investors can choose which borrowers they want to lend money to.
Some platforms that offer peer to peer lending only accept vetted investors, while others will have no minimum requirements. In addition, some will accept companies like life insurance providers and traditional banks. No matter the platform, peer to peer lending is fast, flexible, and has lower borrower requirements than traditional lending, making it more accessible to many.
3. Data Can Be Used Successfully
One of the main problems with traditional lending is the length of time it takes to assess how likely a borrower is to repay their loan. Fintech has made accessing this data easy, and anyone can check a consumer’s credit score and credit history to see whether they are a responsible borrower. Some financial institutions have taken this one step further and begun to gather even larger amounts of data about consumers that gives them an even more comprehensive picture of their lifestyle. It is this that is helping to quicken the process.
4. They Have Made Borrowing Cheaper
Finally, because fintech doesn’t require the same overheads as traditional lending to operate, it has actually managed to lower the cost of borrowing for consumers. For example, by saving on the costs of things like rent, personnel, and administrative expenses, fintech lenders are able to offer lower interest rates to consumers than the traditional banks. As demand changes, these rates are set to go even lower to remain competitive as well.
With fintech taking the borrowing industry by storm over the last decade, traditional lenders are struggling to keep up. It will be interesting to see what the future holds.