Explore the Importance of Digital Data for Instant Credit Appraisal Process

Digital innovation and fintech have made life easier than ever. There is hardly any waiting in the line. You can simply book tickets, order groceries, or even secure a loan in minutes – all from the comfort of your home. The instant loan market in India is making financial help more accessible than ever with the credit appraisal process.

With a range of apps at your fingertips, you can find quick loans designed for salaried professionals, college students, and even those living in less urban areas. Loan amounts range from a convenient ₹500 to a substantial ₹25,00,000.

Instant loans provide borrowers with much-needed convenience, but their rapid approval raises a question: How do lenders balance speed with responsible lending? In addition, they also have to assess borrowers’ creditworthiness and conduct due diligence under tight time constraints. The secret is the availability of digital data.

Let us explore the importance of the availability of data in an efficient credit appraisal process.

Digital Data: The Bedrock of Instant Credit Appraisal Process

Before executing instant loan approvals, lenders must ensure the applicant is creditworthy and can repay the loan dues regularly without any defaults.

Traditionally, credit appraisal methods used to be time-consuming, error-prone, and involved sifting through a considerable number of documents and data sources to evaluate the applicant’s financial stability.

The availability of digital data enables lenders to assess the applicant’s creditworthiness faster and reduces the time taken from days to minutes. With the help of automated data extraction tools, lenders can gather and analyse the required financial information online from sources like online forms. Automated digital data collection also facilitates real-time processing and expedites the credit appraisal process.

The integration of Artificial Intelligence(AI), machine learning, and advanced analytics has also helped assimilate data from various online platforms. AI helps lenders instantly calculate the applicant’s credit score and decide whether to sanction the loan.

Also, manual credit checks can be influenced by personal biases and deny rightful borrowers their loans. This technology offers a better solution in this case.

How Digital Data Help Instant Credit Appraisal Process?

To stay profitable, lenders must ensure that they sanction loans to only creditworthy and reliable applicants. A robust credit appraisal process is a must for this. Let us discuss 8 ways in which digital data helps lenders make faster yet reliable decisions:

Decision-Making Is Quicker 

Data collection helps lenders automate their decision-making process using advanced algorithms and AIs. This eliminates the need for manual and time-consuming process of manual data entry and analysis, resulting in instant credit appraisals and loan disbursals.

Richer and Wider Data Sources

Digital data allows for faster decision-making without compromising on the quality of judgment. Lenders can get information from varied data sources such as financial statements, tax returns, and more, which helps lenders make better decisions and reduce errors.

Enhanced Risk Assessment

Lenders cannot afford to compromise on the quality of their portfolios due to the hastening of the credit appraisal process. Faster cannot mean less reliable; digital data helps ensure that credit appraisals are faster and more accurate.

Lenders can use credit report analysis, data from multiple sources, and alternate data points to gain insight into scores, repayment history, and other financial details that can provide insight into applicants’ repayment capacity.

Fraud Control

Lenders may face attempts of fraud despite having robust systems in place. Digital data can help them identify fraudulent activities or attempts to deceive them by recognising unusual patterns or inconsistencies in the data, thus ensuring a more secure lending process.

Targeted Offers

Data helps lenders get a more comprehensive view of customer profiles. They can better understand the customers’ needs and financial behaviour, enabling them to provide tailored solutions and improve customer satisfaction.

Operational Efficiency Improves

Digital data eliminates the need for manual entry, and paperwork-required data is readily available, helping lenders improve their operational efficiency and allowing for quick credit appraisals.

This also reduces the chances of errors; credit assessments are more objective, as automated processing eliminates any chances of inherent biases playing any part in the credit appraisal process. 

Sounder Decisions for Credit Appraisal Process

Data helps lenders go beyond traditional assessment tools like credit scores. Lenders can extract valuable data from bank statements and alternative data sources to get a deeper, holistic view of the applicant’s profile for better credit decisions.

Applicants who are not creditworthy do not get loans. At the same time, digital data availability promotes financial inclusion by ensuring the deserving do not remain out of the purview of formal credit channels.

Predict Credit Behaviour Accurately

Traditionally, credit assessment focuses on past behaviour. This approach has two challenges. First, it does not predict the applicant’s future, and second, lenders are unable to assess applicants without any credit history using traditional tools.

Data analysis helps predict credit behaviour with a fair degree of accuracy and enables faster decisions. Lenders can access social media activity and smartphone data to understand customer’s credit risk levels and predict how the applicant will behave in the future.

To Sum It Up

Digital data helps speed up the credit appraisal process, and if required, lenders can provide instant approvals by analysing readily available data from various sources. Lenders can also use digital data to improve their risk assessment, better control fraud, enhance operational efficiency, and predict borrower behaviour.

Precisa offers a combination of solutions that can help lenders harvest and benefit from a rich range of data sources available and strengthen their instant credit appraisal process. Lenders can use the Bank Statement analyser, GSTR Analysis, and Credit Report Analysis to help them in the credit appraisals and maintain the quality of their portfolios.

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