Traditional means of analyzing a borrower’s credit worthiness often fails to provide a complete picture of their financial wellness, potentially excluding these individuals from securing the loans they need. Consumer lenders, whether a financial institution (FI) or non-FI lending organization, that still rely primarily on credit scores to make decisions are missing out on a significant opportunity to grow their business and reach borrowers in need.
According to the National CU Foundation’s Financial Wellbeing for All Initiative, more than 67% of people in America are not considered financially healthy. As interest rates rise this year, borrowers who may not qualify for affordable rates or a loan itself through traditional decision modeling are at risk.
Consumer loans, including auto, personal and other types, are a necessary component for many borrowers looking to improve or enhance their lives. In order to avoid excluding potential borrowers from achieving their financial needs, consumer lenders are turning to alternative data to make more informed decisions.
Consider this scenario:
A stay-at-home mom of two school-age children recently found herself widowed. As she left the workforce a few years ago, all of the financial accounts, car, home mortgage and other assets were in her now deceased husband’s name. Without a sufficient credit score or work history, she may be ineligible to secure the necessary financial assistance, such as a car or personal loan, or is approved but for a high interest rate.
By leveraging alternative data, such as bank statements or historical payment history, lenders can see the full financial picture and make a faster, fairer decision for a borrower. Manually analyzing this data and waiting for the borrower to provide all of the necessary documents can slow down a process and may miss key pieces.
Instead, consumer lenders should consider leveraging technology that safely and securely connects to all financial accounts, provides access to historical data in minutes and identifies a fair loan amount and rate to fit that borrower’s needs while expediting the underwriting process.
Additionally, lenders should leverage configurable workflows to easily create customized own customer journeys, collecting the information to make a fair and accurate lending decision. Using a data-based solution, the risk and guesswork is taken off the lenders by providing a full financial picture, opening up the doors for untapped opportunity for both parties.
In our latest report, learn how your consumer lending organization can leverage new technology to make smarter decisions. Download a copy to uncover how you can improve your loan decisioning, help eligible borrowers, and increase your revenue.
Download Our Latest White Paper