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Artificial Intelligence Precise Way to Determine Loan Eligibility

Nov 9, 2021 15 min read

Artificial Intelligence Precise Way to Determine Loan Eligibility

If you have ever applied for a personal loan in the past, one question which must have crossed your mind at least once is, am I eligible for this loan in the first place? And, no matter how experienced you are with financial institutions and their instruments, the challenge with traditional financial instruments has always been the fact they do not inform the borrower first hand if they are eligible to apply for a loan or not.

However, as fintech technology has evolved over the years, interventions and inventions like artificial intelligence have made it easier for both stakeholders to accurately calculate the eligibility of the borrower. Thus, in today’s blog post, I will share with you how lenders across the nation now leverage artificial intelligence to accurately calculate your eligibility for a loan and how you can benefit from the same. Without further ado, let’s get started.

What Is Artificial Intelligence?

Before we dive into the depth of understanding the various benefits lenders across the world draw from leveraging artificial intelligence, one of the first and most important aspects we need to understand is the essence of the same.

In simple terms, artificial intelligence can be defined as a technology which equips machines (advanced computer systems) to leverage learned knowledge of human intelligence and mimic the same in their operations. Essentially, in contrast to the natural intelligence displayed by all living organisms, artificial intelligence is displayed by machines, and it is largely conceived around human intelligence.

At its essence, artificial intelligence revolves around a number of concepts ranging from natural language processing and machine learning to expert systems and speech recognition. However, when most vendors refer to artificial intelligence being used in their applications, only one component of the same triumphs over the others, and that is machine learning.

How Do Lenders Use Artificial Intelligence?

Now that you are familiar with the essence of artificial intelligence let us dive deeper and begin to understand the use cases of this technology, specifically in the field of lending.

If you have ever opted for a traditional loan in the past, one common problem you must have come across is the long waiting times these financial instruments arrive with.

For instance, a traditional home or vehicle loan from a bank typically takes anywhere from 2 business weeks to 4 business weeks to get approved and subsequently arrive at your bank account. The reason behind this being, the entirety of the lending value chain is dependent on manual processes and human capital, meaning it unscrupulously suffers from inefficiency and human error.

On the other hand, modern lenders such as Zavron make use of artificial intelligence and machine learning in their personal loan module, ZinCash instant personal loan app, to automate a majority of the manual processes and rapidly increase the efficiency of the entire process. For instance, whereas you would need to submit a three-page long physical application to apply for a traditional loan, you can complete the same application via the ZinCash app at the tap of a few buttons.

Instead of needing to share your complete information with the lender, all you need to do is share your essential know-your-customer information, and the rest will be automatically taken care of.

Thereby, by largely automating the entirety of the lending value chain by artificial intelligence and machine learning, the lender is essentially increasing the efficiency of the process, and you are benefiting from it directly.

To understand this better, let us take the help of an example.

One of the most important steps of any credit process, be it a credit card or an instant personal loan, is the credit review stage. This essentially translates to the fact that the lender will request your latest credit information and, based on the score assigned to you by the credit rating agency, assess your overall creditworthiness.

In India, there are now 3 main credit rating agencies, CIBIL, Experian and CRIF HighMark, and each of them assigns you a score of 900, out of which you need to have a minimum of 750 to be smoothly approved.

Now, in a traditional loan process, the lender will take at least 1 business week to first request your latest credit report from the credit rating agency, followed by actually reviewing it and arriving at your creditworthiness.

Along with this, since the entire process is manual, there might be instances where an unworthy applicant is assigned a higher credit limit, setting the stage for a default, and a worthy candidate is rejected. Lastly, in a manual process, you are always in the dark as the lender has no way of intimating you beforehand if you are eligible for the loan or not.

On the other hand, when you apply for a Personal Loan in New Delhi through the ZinCash artificial intelligence powered application, the app automatically pulls your latest credit report from the credit bureau and, based on certain predefined criteria, instantly assesses your creditworthiness and grants you a limit.

The best advantage of this methodology lies in the fact that the entire process is extremely fast (takes less than 5 minutes), easy and risk-free for both you and the lender, and is entirely automated and transparent. This essentially translates to the fact that you are never kept in the dark, and are fully aware of your complete eligibility for the loan right from the start.

The Way Ahead

Lenders across the nation are only beginning to leverage artificial intelligence and machine learning algorithms to not only better understand customer behavior but also better serve their exact requirements and preferences. There is still a long way to traverse, however looking at the current progress; it is easy to predict that the future for artificial intelligence and digital lending is bright in India.

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