Many different changes are impacting your ability to get a loan. There are still more changes that will go into effect over the next several months. Learning about the different changes allows you to understand the different factors that loan officers may consider.
Financial institutions are going to become even more concentrated on pleasing the customer. While this does not mean that they will approve every loan, you will find that financial institutions will be striving to provide you a more personalized experience. The process of applying for a loan will become easier and more user-friendly.
Many institutions will also come up with better ways to protect against identity theft and to help customers when cards are lost or stolen. You will probably also see financial institutions helping with car breakdowns, offering discounts with particular retailers, providing emergency travel assistance, and giving faithful customers access to particular airport lounges.
If you are a smart investor, then you do not put all your investments in one place. Analytics allow lenders to make sure that they are regularly making loans for diverse items, helping to ensure that their portfolio stays profitable. Segmentation analysis allows lenders to understand which segments of their clients are providing the most profits and which are creating the biggest losses.
Analytics also helps lenders understand how loans are performing over time. Examining non-traditional metrics allows lenders to spot credit risks who may not have good FICO scores because they have avoided credit cards and other loans in the past.
Current Expected Credit Loss
If you have gone to a lender for a loan in the past, then it is likely that they have used Allowance for Loan and Lease Losses accounting practices to try to determine the amount of money they will need to reserve in case you do not pay the loan. Over the course of the next three years, lenders will be switching accounting practices to Current Expected Credit Loss (CECL). This change will cause lenders to try and predict how many people default on loans like the one you want to receive.
If you are looking for a long-term loan, then you may discover that these loans have a higher interest rate than before CECL was implemented. If you are looking for a short-term or variable loan, then you may see interest rates tied more to current economic conditions. Regardless of what type of loan you may be looking for, CECL will affect the loans you get from this point forward.
Speed of Loans
Financial institutions will develop technology allowing people to get a loan within 24-48 hours without ever having to see a loan officer. This will allow people to move forward on many different types of projects much faster. For instance, the average home mortgage in the United States takes from 30-45 days to acquire. Speeding up the process helps both the bank and its customers.
There are many different changes happening in the financial landscape that will affect how you can get a loan. The process may be completely revolutionized within the next five years.
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