If we compare how we live our lives a couple of decades back or how our elders use to live, we can easily spot the difference in technology around them and us. In the early 2000s, we do not have access to the internet everywhere. We did not have any mobile phones which can support us in office work and so on. Technology has changed every aspect of our lives, and it will keep on changing.
Talking about the change in our lives, it is worth mentioning how businesses have changed over time. Many companies were nonexistent in the 2000s that are currently working around us like fintech (Financial Technology). These are the companies that use technological advancements to help companies and individuals to manage and transact money. Whenever we talk about business and money, this always leads to loans.
Fintech gave birth to an online business loan. But this is just one aspect of fintech. Technology has influenced the loan industry and has drastically changed the dynamics of it. So, how does technology changed or improves business loans? Let us see it in detail.
Impact of technology:
When we talk about business loans in the 21st century, we cannot ignore technology and the role it plays. Technology has improved many things like our connectivity with our loved ones to our cab booking process. So it must have also impacted the loan industry as well and improved the process for a business to obtain a loan. Here are some improvements which technology has brought in business loans:
Building a bridge between a lender and a borrower:
Imagine yourself as a business owner who needs to finance his business because you are $10,000/- down. This is making you worried, but you do not have enough time looking for which bank is giving loans and at which rate, and either your bank is good against the other one just across the street. Also, when you select a bank, now you have to go to the bank, sit in front of a banker to fill out the application. Submit the application and all the relevant papers for which you have been working for a week. Resubmit a paper if it is not correct or if something is missing, and you do not know whether the bank will approve your loan or not.
This is not an old story of the 19th century. It used to happen just a few years ago. But with the help of technology, a borrower is aware which bank, or financial institution is offering which type of loan and at which markup rate. Also, the lenders do not have to put billboards or newspaper ads or Television commercials and so many old school methods. They have to upload the update on their website, and this can do the job for them. There are also some websites where a borrower can compare the loan terms and markup rates side by side to make an informed decision. So in this way, technology has bridged a borrower with the perfect lender he is looking for.
Credit score or Creditworthiness evaluation process:
As a lender, you want to be sure that you will receive your money back. For this, what will you do? You are not going to give your money to everyone who asks for it. This is why there is a standard which a borrower has to meet to get the loan. The standards were set so ruggedly and hard that most of the borrowers find it impossible to get their loan application approved. But technology has made it easier.
Before the advent of technology like the internet, lenders do not have all the information regarding the borrowers; hence they use to have their metrics like personal credit score or collateral, etc. However, with the help of technology, a lender can evaluate very minute information like transaction flow analysis and much more. This creates a whole new matrix of evaluation and understanding the borrower for safer lending.
Easy loan application:
Imagine yourself going to decide to apply for a loan. You have decided which bank you are going to choose from. But the only problem is the application process. To apply for a loan, you have to work for a week so that you can collect, print, attest, and some other work to sit on the table of the lending bank and start filling the application form. But you still be uncertain whether you will qualify for the loan or not.
Now again, imagine yourself going to apply for a loan. You have compared all the banks and have come to the agreement that this is the bank from which you are going to get the loan. But you again are uncertain whether you will qualify or not. However, this time you are going to apply online and see if your loan application will go for scrutiny or not. You do not have to go to the bank this time, just by sitting anywhere where you have an internet connection and a laptop or a smartphone. You fill out the form and submit it. Instantly, you will receive the email if your application is accepted or not. How does that sound? Easy right? This is what technology has made it for a borrower and a lender. A borrower does not have to wait for weeks to see if his application is accepted and also work day and night for the paperwork. Also, on the other hand, a lender does have to look at every application. Computers do it for them, and only those applications which fall under the set criteria get through to the table of the lender.
High loan approval rate:
This one is connected with the improvement above. When you, as a lender, do not have to go through all those applications which do not fall upon your criteria, your efforts will be focused on only those applications which can be given a loan. Hence you can now focus on serving them better by offering some relaxed or, in other words, personalized and customized offers that will benefit you.
Also, the other side is for the borrower. A borrower will get to know quickly whether he can get the loan from you or not. This helps the borrower focus on finding the lender who can help him. You will not have to waste your precious time upon a bank that will not go to give you a loan after you have put in work for a week or so. Hence if your initial loan application is accepted, then there will be a high probability that you will get the loan.
Loan payment tracking system:
When you have borrowed the money, it is hard to keep track of your loan payments and to pay on a specific date. It happens that sometimes you are so messed up with a new project that you forgot to pay the due money back to the lender. This might result in asset recall from the lender or some penalties, which I know you do not want to give. So technology helps you keep track of them. This tracking system can be automated, as well. It can make payments upon your behalf upon your per set date and time. Also, it can notify you that you have to make the payment today.
THE BOTTOM LINE OF THE DISCUSSION
It can be said that technology has improved our everyday life. The way we interact with each other and the way we work. Technology has also impacted the way we transact money, and this change applies to the way we use to borrow or lend money. With technology, it is easy to get a loan now because the lender and the borrower are more informed. However, whenever you are into taking a loan, you have to be cautious because if you can take a loan, it does not mean that you should take a loan.