The announcement of any innovation in the process of simplifying and reducing credit formalities is a potential reason for enthusiasm. Increased competition in this field more and more often requires that a quick, simple and trouble-free loan granting decision not only be a catchy slogan but also be reflected in reality.
Good Finance made such a move forward by announcing that it would issue a credit decision within – half a minute! Is it even possible and how does it look in practice? We checked! We encourage you to read.
Banks, when communicating their offers of unsecured loans and cash loans, quite often emphasize the fact of how quickly we will find out if and under what conditions we will be able to borrow. However, attention should be paid to a very subtle nuance that may be overlooked by less skilled financial market participants.
In their advertising slogans, banks repeat that we will be informed of the decision in 5, 10 or 15 minutes. In fact, at this time, most often, we will only get preliminary information about our creditworthiness – in other words – whether we have any chance for additional funds. To this end, we are asked a few basic questions, such as:
Based on such general questions, we can actually get information on the initial credit decision quickly. However, it is not binding in any way. It may, therefore, happen that the client will be vouched for after full evaluation. The initial decision in less than a quarter of an hour does not really mean much to us – although the tone of such a message is very strong and banks like to use it. In fact, we still have a long way to go to sign the final loan agreement
Why can’t credit verification be fully automated? Banks use the standard procedure of checking the applicant at the Credit Information Bureau and at the Economic Information Bureaus. When it turns out that we are in arrears with payment of installments or, worse, we have a case in debt collection, we can forget about positive verification of the application.
The situation is slightly different from clients who have previously been verified by the bank on the basis of their previous cooperation with a given bank. Such clients receive credit offers specially prepared for them – the so-called binding ‘special offers for you’. They are constructed on the basis of the history of inflows to the account, card transactions and servicing of previous loans.
In this case, we just need to confirm the amount we are interested in and follow the bank’s instructions. The furthest in the process went the aforementioned Good Finance, which promises to issue a credit (final) decision for its clients in less than half a minute. The customer familiarizes himself with the terms of the loan agreement and approves the willingness to conclude it by entering the SMS code.
Truly, isn’t it? The increasingly better sales results in this segment, which Good Finance communicates, give you the thought that this is the right direction – the quick decision-making process must undoubtedly make the other competitors in the loan field jealous and give hope that the customers themselves will gain the most in the battle on the horizon.
It would seem that banks’ greater knowledge of us should be followed by better and better matching loan repayment models. However, this is not the case – credit history is not everything – equally important is the calculated risk of random factors, such as accident, loss of job or health. Aware of this, banks are making an appropriate risk margin to minimize the impact of such inferior quality loans on their entire portfolio.
Therefore, despite historically low-interest rates, banks keep quite high real rates, offsetting lower costs of borrowing with increased commissions, insurance or other charges. A loan is a long-term commitment – one should be particularly sensitive so that even the fastest and most convenient conditions for obtaining a loan do not overshadow the most important thing – costs.
To this end, it is best to use the available comparison websites and lists of the most advantageous loans – then we are likely to avoid a salary overpayment for loan or loan repayment.