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Assessing a Loan Applicant’s Abilities in an Unpredictable World

The relationship between a lender and a customer seeking out a loan has changed drastically over the last thirty years. When my grandfather wanted a loan to rebuild his house, I remember the worried discussions at home. He didn’t have anything to fall back on. Still, he had worked at the same job for many years, had a steady paycheck and had finished paying the mortgage on his house many years before. Throughout all those years he had a constant relationship with his bank’s branch tellers and workers. In fact, they were on a first name basis and considered him a reliable man that sticks to his word. Every financial transaction, big or small, went through the bank. Because of this he was approved for the sum he needed and returned the loan on time.

The relationship between a lender and a customer seeking out a loan has changed drastically over the last thirty years. When my grandfather wanted a loan to rebuild his house, I remember the worried discussions at home. He didn’t have anything to fall back on. Still, he had worked at the same job for many years, had a steady paycheck and had finished paying the mortgage on his house many years before. Throughout all those years he had a constant relationship with his bank’s branch tellers and workers. In fact, they were on a first name basis and considered him a reliable man that sticks to his word. Every financial transaction, big or small, went through the bank. Because of this he was approved for the sum he needed and returned the loan on time.


A New Approach to Collecting Information


The attempt to assess who is the solid, reliable loan applicant, in terms of a financial institution, is difficult and an ongoing challenge. Many banks have simply excluded themselves from the conversation by denying small loan applicants, whether by setting a minimum amount or by denying anyone with less than the pre-requisite yearly revenue. In the meantime, there are many loan customers seeking funding for their business. No matter the FICO score of the owner, both brick and mortar businesses and ecommerce businesses expect financial lenders to offer solutions according to their needs. And by meeting their needs they need to be able to assess their credit risk.

The answer might seem obvious, while it is not an easy solution. Lending institutions must turn to utilizing the data resources available to them. Ultimately, the data might not be very difficult to find, for those who know how to find it. Moreover, extracting the information from the different available sources is an extremely useful tool on many levels. Still, using data towards correct assessment of loan customers’, necessitates competent analytical skill. In fact, it requires a revolutionary approach. The challenges are twofold-one, how does a lender source this data? and two, how does a lender make correct decisions based on this information?


Data Sourcing to the Rescue

If in the past all financial interactions went through the bank, today there are several monetary and business systems customers use. The problem of obtaining a clear financial picture can be solved through leveraging information by keeping track of customers’ fiscal actions. This allows a lender a true analysis of a loan applicant’s credit risk, while still being able to find the terms and conditions that meet the customer’s needs. A thorough examination of the data available does more than benefit a lender’s clientele list. In fact, it is a way for the lender to minimize risks in an ever-changing economy, as well as increase revenue by finding new clients and opportunities.

It might seem like an incredible or impossible feat. Indeed, assembling and analyzing all the necessary data for your client base requires professional understanding and expert knowledge. Choosing the correct sources to tap, recognizing the data source needed and especially figuring out what information is missing takes time and learning. Yet, these days, it is the one certain way for a lender to navigate the changing tides. The future of lending is here. Both alternative lenders and traditional establishments need to come to terms that change is the only way to move forward.

Payzday has taken upon itself the task of revolutionizing and bettering the future of online loans. To find out what Payzday can do for you, please feel free to contact us here.

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