Personal loans as a product are constantly evolving. As per the advancement in technology, the financial industry is continuously shifting, and that is changing and shaping the borrower’s experience. Financial institutions are implementing certain trends, and through that, customers can witness the changes in the financial market, which is revolutionizing the process of borrowing.
In this blog, we will delve into the process of a variety of lending methods that are being implemented by the banks and the financial institutes that are changing the landscape completely.
- Practice of Digital Lending
As India has entered into the technological era, the number of people who have purchased phones has increased significantly. Now, people can use different types of products and services from their phones for personal use.
A DSA partner can recommend and suggest digital lending options to their clients and can guide them in getting loans through the online medium. The rise of digital devices is a great enabler for finance companies as they have launched their apps, and through that, one can finally get the required amount from these digital apps.
In this space, certain startups are partnering up with traditional banks, and through that, one can get loans and credit options directly from their mobile phones. For example, people can now use their credit limit without the requirement of a credit card and can use the UPI payment platform to complete their transactions.
- The Start of Peer-to-Peer Lending
Peer-to-peer lending is a new and emerging way that is coming into the space of personal finance. It is through the use of a P2P platform that one can become a borrower and, at the same time, use the portal as an investment option.
It is a different type of financial product, and banks don’t require them to sanction the loan. Here, the lender that brings the borrowers and investors maintains the total fund of the platform, and, based on that and personal profile, it can decide on loan disbursements and allows people to lend to each other via a lender portal.
- Alternative Credit Scoring
In the traditional credit scoring models, a person who is eligible for personal loans is the one who has a long credit history. Therefore, people with a minimum credit score don’t have the opportunity to gather funds and can’t create a long credit history. Hence, banks used to reject the majority of the personal loan offers.
Now, in the alternate credit scoring system, a lender can access a greater pool of data, and through that, they can check whether a person regularly pays the electric bill, clears the rent, and is based on their monthly income. All these factors help to determine whether the person is actually for the loan risk, and based on their return, one can thus create a long credit history.
In this scenario, a person who has completed ICICI bank DSA registration or is from some other financial institute can have a better chance of helping customers find the perfect plan for the start of their credit history.
- Loan Product Personalization
Personalization of loan products is essential, and based on that, one can access the personal loan fund, which is customized to the needs of the borrower. Some multiple NBFCs and banks are leveraging digital technology with the help of a startup, and through that, one can use the platform to get loans.
Here, the banks are considering factors such as the income of the person, their spending habits, and financial goals. Based on all these factors, one can get personalized loan products and can get flexible terms.
- Decentralized Finance(DeFi)
DeFi is a blockchain-based system that eliminates all intermediaries and allows the user to use the technology for peer-to-peer lending and borrowing. It helps a person create smart contracts, and through that, one can automate the loan agreements and keep the proper track record of the loans.
These platforms are used so that one can maintain transparency and security, and through that, one can rely on this new financial system, which is a great platform that is revolutionizing finance completely.
These are the new modes of finance, and through them, one can take advantage of personal loans and other financial products.
