The future of lending

Do you remember the last time you walked into a brick-and-mortar bank branch to borrow money?

About four years ago, I walked into a bank branch to apply for a personal line of credit. I felt nervous walking in. Even with good credit, I worried. After filling out a great deal of paperwork, I left without knowing whether or not the bank approved my loan.

Two days later, I received a call notifying me of the amount of my line of credit and my interest rate. I had to return to the bank to sign the final paperwork. Because it was a joint line of credit with my then-husband, deciding when to go back required schedule coordination. We finally made it back in (by appointment) to sign the papers allowing us access to our line of credit.

Fast-forward to last summer. My husband asked for a divorce and I decided to return to my hometown, where my parents could provide support for my son and me. Not wanting to drain my savings to cover moving and divorce-related costs, I chose to apply for a personal loan. Instead of walking into a bank, though, I turned to the Internet.

This time, filling out the loan application took only a few minutes. I received an approval within the hour, signed the promissory note almost immediately, and the money appeared in my account less than two days later. The future of lending is online as fintech companies disrupt the old model used to get a loan.

Consumers expect convenience and speed

Consumers want fast and convenient service, whether they are ordering new clothes online or applying for a car loan. The future of lending is about making things easy, fast, and convenient for borrowers. Thanks to Big Data and our constantly improving technology, lenders can quickly access information that helps them make decisions. Indeed, in many cases, an algorithm based on information in your credit report, along with other easily accessible information is used to provide instant decisions for online applicants.

If you have a good credit score, it’s fairly easy to get a loan, whether it’s a credit card, personal loan, home loan, or car loan. Even without a good score, it’s often possible to conveniently and quickly access borrowed funds (although you will likely pay the price in a higher interest rate).

We are so used to getting what we want as consumers – and getting it when we want it – that we increasingly expect to see our whims fulfilled with the way we borrow money. The future of lending is streamlined and fast. The time-consuming and inconvenient process associated with “traditional” lending is falling by the wayside. New companies promising fast access to funds via the Internet are popping up regularly and meeting consumer demands.

More choices for consumers as they borrow

When I applied for my loan last summer, I didn’t go to one lender and accept what was offered. I also didn’t call around or visit multiple websites in an effort to compare loan rates, trying to hack the best deal. I visited one site and received multiple quotes.

Websites that partner with multiple lenders offer consumers one-stop-shopping to get a loan. You fill out one application and receive between two and five quotes (and sometimes more), including various interest rates. Now YOU can choose between lenders. The better your credit, the better your deals – and the harder lenders compete over you.

The future of lending gives more power to consumers because now we have more access to information, and it’s easier for us to compare lending options. For years, auto insurers have been using the Internet to offer competitive premiums. Now borrowing is catching up.

It’s not just credit card offers, either. You can use the web to apply for car loans, mortgages, and personal loans. Just about any type of loan you can imagine can be had using the Internet. It means more options on top of speed and convenience.

Technology allows for the secure exchange of information

Thanks to technology, it’s easier than ever to exchange information. Scanners allow you to send documentation anywhere in the world. Secure FTP client applications allow you to send sensitive identifying documents and other items quickly and easily. You can even sign loan documents with an e-signature in Canada. There’s no need to walk into a lender’s brick-and-mortar location.

In fact, there are some lenders that don’t even bother with physical locations. This means lower overhead costs, and lower costs to consumers. With the right technology, it’s possible for lenders to collect information, quickly make a decision, verify your identity, get your signature, and then electronically transfer funds into your bank account.

Just a few years ago it would have been impossible for me to complete a mortgage transaction online. However, when selling my home a year and a half ago, I was able to complete all of the paperwork from across the country. As technology advances, and as consumers become more comfortable with what is available to them online, we will see an increase in loans originated online.

The future of lending is all about choice, speed, and convenience for the consumer. Lenders who can’t provide that will be replaced by those who can. And sooner than they think.