There is no question that the rise and improvement of financial technology have made it easier than ever to get high-quality financial services. At the same time, it has made it easier for people to get access to the cash and capital they may need on a personal level. There is one area in particular where financial technology has made an important difference: getting a personal loan. Here’s a look at just how that is the case.
What is a Personal Loan?
In this instance, a personal loan is a small, unsecured loan that can usually be obtained over the internet, particularly fast depending on credit approval. These are loans without a guarantor and have many uses, including the ability to pay for large purchases, consolidate credit cards, pay off student loans, or more. They have a long history of being particularly useful for those who need access to cash quickly. The industry has been growing of late, and a rise in financial technology has been very helpful in this regard.
Democratizing the Personal Loan Industry
Democratizing is usually a term reserved for politics and governance, but in this case, it applies well to personal loans. Previously, if you need a loan, you would likely call your personal bank. From there, you’d have a chance to take out a loan at an interest rate they would set for you. There was competition, but until technology made it easier, you would not be able to easily determine another bank’s rates or repayment terms. As such, banks didn’t have as much to fear from the competition and they would be able to charge you higher interest rates.
That changed within the past fifteen years, as technology grew that allowed consumers to easily make apples-to-apples comparisons between banks and their interest rates. Websites could instantly perform credit checks, give you terms, approve loans, and disperse the cash. This resulted in more choices and better options for consumers.
The Future of the Industry
Financial technology is about so much more than consumer choice and options in cash. Indeed, it is already expanding to other areas. Bitcoin is a great example of what is possible thanks to the rise of financial technology, as are numerous other forms of cryptocurrency. Their rise is only possible thanks to the security systems that allowed bitcoin to be mined and sold.
Blockchain provides another example of advancing financial technology and how those advances are impacting consumers. The blockchain is essentially a digital check ledger. However, it is completely decentralized and distributed, meaning no one person access it. The possibilities for personal loans are endless. In the future, loans can be taken out and stored against blockchain records, making it easier for people to access secondary markets. Right now, blockchain technology is largely confined to financial professionals or traders. However, as more time passes, blockchain technology and cryptocurrency become increasingly mainstream. As a result, the financial technology that serves as the spine of both of these items will likely continue to evolve and make this type of trading more freely available.