One of the biggest challenges that the housing sector in the country faces is the under-fulfilment of loan requirements of Tier II and III cities. Furthermore, banks are focused on big-ticket loans as they operate through a branch-led model wherein costs are fixed, and the banks’ incomes are a percentage of the loan amount. Thus, only a section of society is truly catered to through banks and financial institutions.
Pramod Kathuria – Founder and CEO of Easiloan – says, “The traditional loan application process is tedious and involves intensive paperwork, and the disbursement of home loans takes a lot of time. However, digitizing home loans could be a potential solution to the issues.”
In order to ensure that credit and loan facilities are genuinely available on a pan-India basis, digitizing home loans is a crucial step undertaken by the new-age tech and fintech companies.
Besides covering different parts of the country and not concentrating on large cities, the process of digitizing home loans benefits borrowers in various ways.
Easy and quick processing of loan requests
Digital technology ensures that capturing different details about the applicants is quicker than traditional methods, which could take days for documentation, verification, and disbursement. Kathuria points out, “The overall chances of human errors in data entry are also reduced. The general process of client onboarding is quicker and more efficient.”
Optimizing underwriting procedure
When it comes to banks, experts say there are significant non-digital relationship-building exercises that the banks have to carry out in the traditional loaning processes. Kathuria explains, “Cloud integration makes it possible for the system to sync data from credit bureaus, alternative credit scoring data, valuations, and risk services. The decision rules are also implemented as per different applicable laws.”
He further adds, “Hence, underwriting is quicker as it takes account of a combination of AI-powered algorithms and machine learning which are more effective than human judgement.”
Allowing borrowers with no credit history to raise loans easily
Traditional loans take account of the credit scores of the respective applicants to disburse the loan amount. Through this process, applicants with a poor credit score and insufficient collateral to offer usually witness rejection of loan applications.
“With the introduction of digital lending processes and the integration of alternative credit scoring information used by fintech companies, first-time applicants can access home loans quickly,” adds Kathuria.
Matching the best lender with the potential borrower
Industry experts say digital lending offers an applicant quotes and loan offers from all lenders, rather than making separate applications to different banks or NBFCs. Since the traditional process is slow, an applicant can’t look for loan offers from more than one lender, which has become widely possible due to digitization.
Summing up
According to Kathuria, even though financial service providers and new-age tech companies are working together to make the entire application process to disbursement of loans digital, a few challenges (such as a possible high loan default rate) demand companies’ attention.
Having said that, despite the obstacles before the service providers, experts say the digitization of home loans has indeed benefitted borrowers. There is more credit and loan availability, and the process is quicker and more efficient than before.
