Asset based lending set to disrupt online loan market
After the financial crisis, traditional lending, primarily from high street banks, suffered. High interest rates and a reluctance to lend due to drastically reduced profits, meant that many people simply couldn’t get a loan if they tried. It was during this tough period that we saw the rapid growth of payday lenders, who were willing to lend at vastly inflated interest rates; which unfortunately was the only option available to many people.
Due to regulation, things have calmed down now, but it’s clear that many borrowers are fed up with the industry. Poor business practices and a lack of transparency with payday lenders has prompted a new type of business to emerge. These new lenders, most notably ‘Unbolted’ have created a digital platform that operates on a peer to peer model that produces significantly better rates of interest than other traditional loan methods. At its core, the service operates by lending against luxury assets. This is often at a maximum of 70% of the value, but this allows Unbolted to offer a far better deal, boasting interest rates between 1.5 and 3% a month.
These peer to peer lenders are causing a big stir in the industry, and they look well positioned to offer a viable alternative to options that were previously successful, simply because of the lack of alternatives. The technological aspects of these services are a driving factor in their success as well, and younger, more dynamic companies that actively pursue technical advancements are gradually replacing more traditional institutions in the market. It’s no surprise that disruptive companies like this are being touted as ‘ones to watch’ of the fintech industry.
This trend is not only being seen within finance, but many sectors. Giving your customer base the transparency and accessibility of robust online options has proven to pay dividends, and will continue to drive sales and profits. In regards to a peer to peer lender, the ease of use of the platform combined with better rates and lower risk has seen them flourish over the past year. This success is not only limited to individuals, but peer to peer lending has also generated positive results by lending to SME’s, who often find loans difficult to secure due to limited profits and fluctuating markets. Securing a loan against their assets means they can continue to grow and become profitable with very manageable payments in line with their income.
Because of this, other online loan companies may have to shift their priorities, as right now, peer to peer lending is looking like a method that is truly beneficial to both the borrower and the lender. This is something that payday loan companies have never been associated with, and they will either have to work hard to reestablish their place in the market, or shift their services to a model that is fairer and more sustainable.
In conclusion, peer to peer lending is cheaper, easy to use, and offers a variety of options based on the value of your assets. Online loan companies need to adjust their priorities in order to catch up to these new disruptive players, while the traditional lenders such as high street banks lag way behind in terms of their ability to provide flexible services in an ever evolving market.