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Using AI, the lending system can be revolutionalized. The lending system won’t depend on the biases of the lender. This not only makes a fairer system but also ensure that suitable candidates are lent to.
Deploying algorithms to make credit decisions rather than relying solely on human judgment seems like the simple fix. What AI lacks is warmth; they certainly have the highest level of objectivity.
Bad loans are significant factors affecting the profitability and survival of banks and financial service companies. Due to the high default rate, these institutes cannot remain competitive in the turbulent financial sector/industry.
AI plays the role of a highly efficient and accurate lender. It can identify who is most likely to pay back in time and who isn’t.
And unlike humans who may consciously or unconsciously use biases against protected characteristics, such as race, gender, and sexual orientation, in their decision making, AI can help use facts and data about a person’s history to make decisions and execute the lending process not only fairly but also accurately.
AI is implemented within the loan verification process within financial institutions to make better judgments.
AI’s predictive capabilities help build models for candidates to verify if an applicant can repay the lending company or not.
AI considers income, credit history, length of service, and even analysis of transactions done by the applicant to assess the CIBIL score.
AI establishes relationships to understand the repayment tendency and solvency of the loan applicant.
AI takes into consideration large sets of data and conducts various statistical analyses to give its analysis. Some of the data that can be used are :
Married, self-employed, credit history, loan status, dependents, education, property area, applicant income, co-applicant income, loan amount term, total income, EMI and balance income.
With the fusion of artificial intelligence in financial companies, experts believe that loan borrowers will increase drastically.
Easing the process of rejecting faulty individuals who are unlikely to repay the loan, AI helps in risk assessment and saves banks from losing money on the wrong kind of candidates.
AI is a non-biases and a more effective analyzer of loan repayment capabilities and has streamlined the lending process.