Have you ever tried to apply for a loan before? If yes, then you know the strenuous and exhausting exercise of collecting all the documents you need, submitting them to the lending agent, and waiting for the approval that sometimes never comes. Over the last few years, we have seen technology grow massively. That means that even in the realm of lending money, technology is never too far behind.
Technical tools and financial technologies have made applying for loans and approving the loan applications more efficient. Financial institutions are using these tools to make the process simpler and encourage more borrowers. Mortgage borrowers, on the other hand, need not troop to the bank to apply for the loan. They can do it from the comforts of their homes.
Four Technologies That Impact Digital Lending
The four main technologies that financial institutions use today to process and approve mortgages are robotic process automation (RPA), document automation, enterprise automation, and electronic signature. Commercial banks use RPA to make their processes more efficient. If they receive 1.5 million requests a year, how will the banks finish processing all that without bots to help them run the processes?
Document automation is the creation of document templates based on preexisting data or text from other systems and workflows. It helps automate paperwork so that the waiting time will be reduced significantly. Enterprise automation works roughly the same way, only that it looks at the manual processes that can be replaced with intelligent digital alternatives. For lenders, this will help identify the pain points in the lending process, thereby giving them the chance to automate these processes.
Electronic signatures are pretty self-explanatory. The fact that electronic signatures are now accepted in private and public transactions means a more efficient process. The approval of a loan doesn’t have to wait for the signature of the bank manager or lending officer. A digital signature in an email sent to the borrower is good enough.
How Technology Helps Borrowers
Applying for home renovation loans shouldn’t be overwhelming right now. Thanks to technology, you can get a good idea of how much the loan will cost. Loan calculators are available on your bank’s website. These tools will help you decide if this is the right time for a loan. You can also apply for a loan online. There’s no need to go to the bank and speak with an agent.
Lenders are using innovative ways to find out if you are worthy of a loan. Borrowers do not depend on their credit scores alone. They use digital tools to determine if you should be eligible for a loan. Borrowers will give lenders access to limited financial information about themselves, so the mortgage process can start.
How Lending Is Made Easier by Technology
But it’s not just borrowers who are having an easier time with the lending process. It is even more beneficial to lenders. They can now use different tools to determine the eligibility of the borrowers. It doesn’t only save time, but it also streamlines the whole process.
Loan processing is costly for lenders. The traditional process is more expensive because the banks have to hire agents to transact the loans. The more people the banks hire, the higher their expenses are. Lenders don’t need to maintain dozens of bank branches. They can work from a main headquarter and process everything from there.
Should they allocate the loan to you or not? In the past, lenders use a strict formula to determine if you are credible enough for a loan. The process is often long and exhaustive. Borrowers used to have to wait for weeks before they can receive word about the status of their loans. In effect, there’s a huge backlog that banks usually have a hard time addressing.
The Role of Digital Lending During the COVID-19 Crisis
Amid the pandemic, people tried to keep their money in the banks. Some, however, knew it is the perfect opportunity to invest. Whether you need a home, auto, or business loan, you can safely apply for it during the pandemic. Since all transactions are processed digitally, you need only to send the documents needed via email and wait for the loan’s approval. Banks made the process especially easier during the pandemic to encourage borrowers.
Technology still has a long way to go in changing the landscape of the lending industry. A lot has changed over the past decade, and many of these changes benefited lenders and borrowers. However, robotics, artificial intelligence, and the Internet of Things (IoT) are revolutionary methods that will pave the way for a better industry.