5 Ways to Get an Online Personal Loan How It Is Transforming the Financial Sector
The loan market in India has been growing at a very rapid pace in the last few years. While earlier the market was dominated by adults and middle-aged borrowers, the situation has changed significantly in the last few years. As per a report, young adults, below 25 years of age have become the key driver of personal loans in the country. This group prefers to borrow short-term, low-value loans. They have largely contributed to the loan market growth of 2.4 times in value and 3.8 times in disbursal volume. The emergence of personal loan app based lending has further contributed to this remarkable growth. Here are five keyways in which online personal loan through an app is transforming the financial sector like nothing else.
How an online personal loan is transforming the financial sector
- Ease of financing
It is now possible to get a loan anywhere and anytime! This has been the single most important change factor in the financial sector. People used to wait in line and visit different lender offices to get a loan. Lenders also had to maintain a physical presence in different places. This considerably increased their operational costs.
With an online loan app, the need to maintain multiple offices has ceased to exist. Any person wanting to get a loan can simply install the app and apply for the loan online. Business is not bound by business hours anymore and people can take loans 24 X 7!
- Digital data storage
Customer information safety and archival are much easier now. In the early days of lending, most of the work was done on paper. This was a huge problem. Handling a lot of physical documentation was neither safe nor easy. Further, managing piles of papers was not cost-effective. There were cases of rampant loan fraud because identity theft was very easy. Thanks to the personal loan app-based system, the need for physical documentation and paperwork is almost eliminated. With loan apps, all the customer data is stored in a digitally encrypted format and the risk of customer data misuse has come down significantly. The system will always have scope for improvement, but the degree of rampant loan fraud has also come down by a very significant margin.
- Low cost of operations
About ten years back, the cost of loan origination and administration was significantly higher. Lenders had to maintain a lot of human resources to manage sales, process applications, verify details and process the loan. Similarly, once the loan was disbursed, more staff was needed to maintain customer relations, remind about pending EMIs and make collections in case of loan defaults. Most of these job responsibilities have been rendered obsolete with the emergence of online loan app based lending. With AI intelligence and machine learning, loan applications are processed and verified digitally.
Even EMIs are auto debited from bank accounts. It is now much cheaper to give a loan and to administer it as well.
- Reduced risk of lending
Artificial Intelligence and data analytics have reduced the risk of lending. The need for loan agents to sit and pore upon the credit report of loan applicants is gone. All the data is now fed to an AI-based system that specialises in making loan decisions. These AI-based systems are much faster than anything which was being used by lenders. Computers have no bias; they have no favourites. They simply check the input data of loan applicants and let the lender know if they should be given a loan or not. A clear and accurate decision-making process has reduced delinquent loans in the market by a very high margin.
- Upselling and cross-selling are much more effective
Another factor in which the personal loan app system has completely changed the financial sector in India is the way they have improved the effectiveness of cross-selling and up-selling. Loans were not something where cross-selling or upselling used to be very effective but the new data analytics systems built into the loan apps have turned the picture on its head. Today lenders can better gauge the reasons why someone is taking a loan and can enhance their loan offering with allied financial and other products. This has opened numerous alternative revenue channels for lenders.
Technology can either bring evolutionary or revolutionary changes in any market and the financial system has always been an ardent early adopter of any new technology. Today, with the power of the internet and smartphones, the online personal loan market is looking at a future of unprecedented growth.