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How Fintech Lenders Assess Personal Loan Applications
●May 13, 2021●4 minute read
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Many lenders proclaim their extremely fast application processing times, some of which can process their loans within just one hour (Jacaranda Finance included).
If you’ve ever wondered how this works or what goes into the processing of your personal loan application, the majority of fintech lenders use similar processes. Understanding how your loan is processed may be helpful when applying for one in the future, as it can give you a reasonable idea of your chances for approval.
Below, we dive into how fintech lenders process applications, why they’re able to process loans faster than banks, and the importance of the fintech industry in general.
What steps are involved in a personal loan application?
Firstly, it’s important to understand the steps involved in the application itself. Typically, the first part of an application includes selecting how much you need to borrow, the repayment period (if you have the option), and what the money will be used for.
When a person submits a personal loan application, they will be asked a series of questions to determine their eligibility for the loan. Typically, the applicant will need to provide their basic personal information, proof of identification (100 points of I.D.), proof of income, and residency status. Some lenders require copies of your bank statements, while other lenders may ask for your online banking information to access these copies themselves.
Alongside the aforementioned information provided by the applicant, another aspect of the eligibility criteria is the applicant’s credit history. In other words, whether the person has good credit or bad credit.
What if you don’t meet the eligibility criteria?
Most lenders have a set lending criteria they must follow. If you don’t tick off all of the eligibility requirements as stated by the lender, they are unlikely able to proceed with your application.
Traditional lenders, such as banks and credit unions, typically have strict credit requirements, whereas online lenders can be more lenient. If you don’t meet any of these lending requirements, a lender will likely reject your application.
What happens once you press ‘submit’?
When you press ‘submit’, your application is presented to the lender. Again, each company has its own policies and procedures when processing applications. At Jacaranda Finance, AI and machine learning is used to process parts of the application, while traditional lenders generally have to complete the application process manually.
To give you an idea of how applications are assessed by a fintech lender, the Jacaranda Finance steps are outlined below:
- Done by machine: the AI accesses and retrieves the applicants’ recent bank statements (from the last three months) and categorises the important information. It also gives the application a score based on all of the information analysed.
- Done by a person: the underwriter retrieves a copy of the applicants’ credit report.
- All factors of the application, including the person’s bank statements and credit history, will be analysed to decide whether they can reasonably afford their loan.
- If the underwriter finds that the applicant can afford the loan, they send a copy of the electronic contract for them to review and sign.
- Once the lender receives the signed contract back from the client, they will transfer the loan payout into the applicants’ bank account. They should receive this money within 60-seconds* (depending on who they bank with).
Why are some lenders faster than others?
Fintechs, also known as online lenders, are typically faster than banks because of the innovative technology they use to process their applications. Fintechs, which stands for financial technology, are companies that aim to compete with traditional financial methods and use technology to improve activities in finance.
All things that are now common in the banking industry, from being able to access your bank account online to other finance apps, are all a product of the evolution of fintech over recent years. In the past, all financing went through brick and mortar banks. If a person wanted to request a loan, they had to go into their bank’s branch to complete all of their paperwork. Things as simple as wanting to know an account balance required a person to go into the bank rather than checking their banking app on their phone.
A short summary of the fintech industry
The fintech industry allows the delivery of faster, efficient, and effective financial services. Some examples include:
- Digital lending and credit;
- Mobile banking;
- Mobile payments;
- Cryptocurrency and blockchain;
- Insurance - also known as insuretechs;
Jacaranda Finance is an award-winning online fintech company. We were the first lender in Australia to deliver a 60-second loan transfer. Unlike banks, we deliver personal loans to everyday Australians from all financial backgrounds anywhere, anytime. We provide same day loans by leveraging and continually developing our AI and machine learning loan processing technology. We work six days a week to provide financial assistance to Australians when they need it most. We are an online lender, which means that we have flexible credit requirements.
*Most approved applicants have their money in their bank account and ready to use within 60 seconds once they have accepted their digital contract.
Copyright © www.jacarandafinance.com.au Jacaranda Finance Pty Ltd ® ABN 53 162 078 195 Australian Credit Licence 456 404, Pawnbroking License Number 4221738. The information on this web-page is general information and does not take into account your objectives, financial situation or needs. Information provided on this website is general in nature and does not constitute financial advice.
Written by Rachel Horan
Rachel Horan is a Content Writer for Jacaranda Finance. Rachel has previously produced content for Brisbane City Council, Black & White Cabs, and Clubs Queensland. She has a Bachelor of Mass Communication with Distinction from the Queensland University of Technology.