Today, you don’t have to make the trip to a financial institution if you need to borrow money. You can apply for an installment loan online from the comfort of your own home. But besides this convenience, what else do you get from an online experience? Here is a list of pros and cons to showcase the data-driven borrowing experience
Pro #1: Greater Analytics
Traditionally, a big bank will first check your credit score before they’re willing to grant you funds. If your score is too low, they’ll most likely deny you and the one-third of Americans with bad credit.
The same can’t be said for some of the companies that offer online installment loans. These lenders take a greater look at your financial information before coming to a lending decision. While they may still review your credit score, they compare it with other factors that impact your creditworthiness. These factors may include your income, payment schedule, debt-to-income ratio, and employment.
As a result, you may successfully get an online installment loan for bad credit, provided you meet their other standards.
Pro #2: Customer Focus
Although online loans may happen over your screen, there’s a distinctly human experience. You’ll receive a call from a case manager to review and verify the information you provided. This same manager will also go over your contract to discuss the true cost of your installment loan.[adsense]
Direct online lenders, in particular, have a customer focus bent. These lenders don’t rely on brokers or third-party lenders to underwrite or facilitate their online loans. The result is a streamlined end-to-end process with fewer hand overs; you’ll be in touch with just the one lender at every step.
Con #1: AI Bias
Automatic lending decisions are only as good as the data that fuels the artificial intelligence. Ideally, the people who create these algorithms feed it a large, varied set of data so that it can operate smoothly in a variety of situations.
Algorithmic bias comes into play when the data is insufficient or incomplete. In the financial world, this bias happens when AI platforms incorporate data from underserved communities, especially redlined neighborhoods. Redlining happens when banks deny financial services to a community simply because of their racial demographic.
If included in the data set, the redlined info teaches an AI to connect rejection with skin color or location. This is where the true trouble comes. Without human intervention, the AI will predict even more rejections as it produces data that supports the initial bias.
Con #2: You Require Internet Access
This may seem like a moot point as you read this article from your smartphone or laptop. However, if you’re using a library computer, you may be one of the 19 million Americans who don’t have reliable access to the Internet.
Without the Internet set up at home, the only way you can access these online loans is by paying for time at an Internet café, using a public computer at the library, or taking advantage of an unsecured hotspot. None of these provide sufficient security for when you share your financial information.
Like any financial decision, borrowing online comes with a list of pros and cons. It’s the only way to determine if the pros outweigh the cons the next time you need to borrow money.