It was thanks to the rise of financial technology that the financial sector started to be revolutionized. Nowadays, almost anything is available online. A business without a website cannot reach a bigger amount of customers and cannot interact with them. The financial sector of the economy is only one of the many that is changing. Through fintech, many financial services are becoming available online and one of them is lending. Online lending has managed to get a lot of clients in a short period but despite its popularity, this service has its flaws and benefits.
The Advantages
One of the obvious benefits anyone can have from applying for a personal loan or any other kind of loan online is that they will always find a lending platform they can apply to. Since they’re online they’re available at any time so businesses and individuals can get in touch with them whenever they have a need. Both online lenders and physical ones rely on data to determine if a client is eligible for a loan or not.
The good thing about online lenders is that they have access to more data about the financial background of a client like the shipping data and online sales data. They can also access a client’s recent accounting records. The platforms’ systems are made up of complex algorithms that allow them to go through a lot of data quickly so an applicant will know if they are eligible for a loan or not.
This saves time and since such platforms don’t charge too much for their services they reduce costs too, and both things are a plus in any business owner’s book. Finally, by having access to recent data online lenders can come to a more objective decision on eligibility for a client and don’t have to rely on a credit score to approve a loan to someone. Naturally, online lending has its drawbacks.
The Disadvantages
One of peer-to-peer lending’s benefits is providing favorable terms when it comes to applying for a loan. This gives a person better chances of getting a loan but the whole process has some negative sides as well. Since lending platforms won’t charge too much for their services and don’t give out high-interest rates then this might prompt clients to take more loans more often. This will likely lead to over-indebtedness and the inability of clients to pay back the money they borrowed.
Since every part of the online lending process is dependent on technology and internet access a simple power outage or a malfunction of the system can lead to a stop in operations. As most businesses and individuals like to borrow money as fast as possible if an issue like this occurs, it will stop them from relying on a platform.
The thing about issues is that they’re bound to happen and what’s needed is a quick solution so things can go back on track. However, a client running into an issue will need customer support to go through the solution and lending platforms will need a bit of human touch in these kinds of operations.