Personal finance is one of the most important topics of our days. Interest rates in the developed world are at historic lows, the unemployment rate is shrinking, and the number of people seeking financial help is on the rise. All this has led to significant innovation in the financial industry. One area that has seen a lot of innovation is in personal loans. These are loans that you take for simple things like a car repair, medical emergency, or to buy something. Some of the most popular companies that have taken advantage of the current economic environment are Tunaiku, Lending Club, and Prosper.
Peer to Peer Lending
One of the industries that has been growing fast in personal loans is peer-to-peer (P2P). This is an industry that makes it possible for people to borrow and lend money directly with one another. The industry creates an industry that is mutually-beneficial to borrowers and lenders. Lenders give money and charge interest while borrowers receive money that they might not have received from banks. The latter point is important because banks are afraid of lending to people when interest rates are very low. The P2P companies like Lending Club, Prosper, and Bondora create a platform and vet the borrowers. They also come up with algorithms that enabled these people to invest automatically. The industry is seeing rapid growth, especially in Europe.
Mobile lending
Mobile lending is another popular lending method especially in the emerging markets. This method allows people to send and borrow money. A popular mobile lending is a Kenyan platform known as M-Pesa. This is run by the biggest mobile courier in the country. In recent years, many companies have come up with mobile wallets that enable people to borrow money. A good example is an Indonesian company known as Tunaiku. Tunaiku has a mobile app where people can borrow money.
Mobile lending works in a very simple way. When you download an app, the company asks you to give it permission to look at your messages and other communication. The company uses technology to see your history. It then uses data from credit bureaus to determine whether you are a good borrower. After doing all this, the company gives you money. There is no collateral and the interest rate you get charged tends to be relatively high.
There are several benefits of using these services. First, mobile lending is a fast method to borrow money. All you need to do is to download an app, enter some data, and then borrow. The company will keep monitoring your account to determine whether to increase your limit or not. Second, mobile lending is accessible to unbanked people. You don’t need to have a bank account to access mobile loans. Third, these loans can be accessed any time of the day.
Crypto Lending
Cryptocurrency is one of the most innovative solutions of our time. At their peak, cryptocurrencies were worth almost a trillion dollars. As of this writing, all cryptocurrencies are worth more than $200 billion. An industry that is emerging fast in the crypto industry is crypto lending. These are loans that are fiat loans that are backed by crypto. The idea is that you go online, download an app, deposit your crypto, and then borrow money against it. The advantage is that with these loans, you continue to hold your crypto. If the price goes up, you will get more value when you pay back the money. A good example of such a company is Nexo.
In summary, the personal finance industry is seeing a lot of changes and growth as more people become more knowledgeable. This industry will continue to grow as innovation and venture capital accelerates. As a borrower, this will be to your advantage. You will have more choices and lower interest rates to pay. You will also have access to better services.
