Future of alternative lending and online loans

In essence alternative lending refers to the money lending industry outside the traditional banking setup. This industry has seen a steep surge especially after the great recession of 2008. Due to the emergence of newer technologies, data analysis platforms and special algorithms, a good number of companies entered into this market. Alternative lending has come as a breather both for personal finances and small business funding needs.  

 

Since the financial crisis hit the markets, many small business owners have been turning to online lenders for their financial needs instead of local banks. Online lending or instant cash loan service which is more commonly referred to as the FinTech industry has gained momentum due to its efficiency, convenience and pace. There is no signing of a vast amount of papers, no trouble in convincing the bank managers and no long waits for securing the payments. FinTech is a fast and an easy method of securing finances where you go to a particular vendor website or app, fill in your details and get an approval or disapproval generally within a few hours of submitting your request.

 

Another great value of this alternating credit system for instant cash loan is that even new entrepreneurs can secure loans much faster. While at banks there might be a selective bias where the banks show more trust in lending money to established businesses, an approval or denial is based more on your credit history and track record than anything else.  

 

People in need cannot wait for too long to secure short term personal loans/instant cash loan that they need. They are increasingly using the alternative credit space as it is fast and efficient. As big data technologies becoming more complex and advanced with every passing day, the space for online lending is getting stronger and stronger. Now companies can now analyse everything about their consumers.

 

Although the alternative lenders are costly, they have discovered a profitable niche that bankers are not catering to due to the risks involved. Alternative lenders are creative and out of the box thinkers and with the operational size being small, they can tailor-make proposals for specific needs. Data suggests that these companies usually cater to financing needs from 10,000 to 10,000,000. Some lending companies may also link up two parties that will financially benefit both of them.

 

If this data driven approach is adopted, it will make ensure that the portfolios are made risk free or at least will reduce the risks involved. This is also definitely going to decrease the cost of capital which shall in turn enable alternative lenders to work with traditional banks.