e-Lending
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[edit] Definitions of eLending
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It has been suggested that this section be split into a new article entitled e-Lending (libraries). (Discuss) |
- The most predominant use of the term eLending refers to obtaining a loan from an online website.
- Another less frequent use of the term eLending exists within Libraries referring to the lending of digitized books. It is possible that the term will grow as libraries negotiate more liberal rights in terms of electronic sharing. Additionally many books are becoming part of the public domain (not subject to copyright permission), each year, which will add to online availability. These two significant facts may contribute to the more frequent process of eLending in terms of books.
[edit] eLending - Online Lending
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It has been suggested that this section be split into a new article entitled e-Lending (financial). (Discuss) |
The term eLending or e-Lending is a relatively new term and is used to describe a new medium for bankers and other lenders to engage in online lending activity. Data can be transmitted electronically without the use of paper, telephones or fax machines.
The information age has provided loan seekers with an opportunity to compare, search for, apply for and receive loans from internet websites. Some of the top online lenders allow consumers to "sign" their documents online with an electronic signature.
[edit] Market Shifts to eLending
Bankers who traditionally relied upon local customers at the branch level, or lenders who traditionally relied upon responses from advertisements in local or regional newspapers, now require an online presence to compete nationally or in some cases globally.
There has been an explosive growth in online loan applications, yielding a boon for lenders who are adept to internet lending. eLending is a market segment that has garnered the most attention from spammers or affiliate marketing experts. They vie for customers at lending comparison pages and then forward their inquiries to valid e-lenders.
[edit] Consumers benefit from eLending
Lenders who are competing for online applications are aware that the consumer has many choices online. Very often low cost options are available to the online consumer in order for eLenders to be competitive.
Consumers may benefit from eLending programs due to the increased efficiency of online lending, as ordinary Snail mail may not be required from eLenders. A loan application, a credit report, an appraisal report, and title insurance reports may all be sent via email to and from the parties. Efficient loan processing can speed up a consumer loan transaction.
[edit] Faster Mortgage Loan Approval
What excites consumers most is the speed of online lending transactions. Electronic data can allow a borrower to apply for a loan quickly from their home at any time of the day or night. They can have their credit run a fico score, which can help the lender's computer determine if they meet the lender's credit score requirement, if so a loan can be approved in mere seconds.
A home equity loan may not even require additional documentation such as income or an appraisal, if there is sufficient equity as determined by an online appraisal that averages the home values online.
A mortgage loan may be approved in seconds, but the lender requires the property have a "Fannie Mae" approved appraisal completed as well as a title insurance company to guarantee the title of the property. That can take a few more days but the loan can still fund very quickly in most cases.
The advantages of eLending are increasing as websites continually make it easier for consumers to fill out online applications. Generally eLending is quicker than traditional loan processes and it can save both parties time and money. Consummers with good credit scores will find it much easier to secure approvals and will have more choice than those who do not.
[edit] eLending and Fico Score Requirements
To prepare for an online mortgage or other eLending type transaction, know your credit score. You can obtain the three most common credit scores being reported about you directly from TransUnion, Equifax, and Experian (fico). Go to their sites and get a free report but if you require the information rapidly pay their fee to get a copy of all three bureau reports and the corresponding scores they have assigned to you.
Usually the middle score will count and should be at 650 or above for your eLending transactions to be approved electronically. Some lenders will have higher criteria online. Few will have lower. To be approved electronically with a sub 600 fico score, visit a broker who can access their wholesale lending data base and put your loan through a lender that allows a fico score below 650, 600 or even lower. The lowest score requirement for an electronic approval is generally done through large "sub-prime" or "Alt-a" lenders. They can allow for a 580 score automated approval.
Lower scores can be approved in traditional format, but will need more review on other items such as property appraised value. eLending options are best accessed when your credit score is average or above. To access the new wave of electronic lending, diligently manage your fico or credit scores.
[edit] Explosive eLending Market Includes Non-Lenders
The most common sign an online lending site is not that of a banker or mortgage broker is the absence of posted interest rates or loan criteria. In lieu of product information, there is usually a request for the borrowers information, which is promised to yield a number of competing quotes. These sites may be run professionally and may yield competitive quotes that assist a would be borrower.
[edit] Rogue Lending Sites Can Be Very Dangerous To Consumers
e-Marketing is a new industry tailored to bringing business and consumers together for a commission or fee. They are very competitive in their attempt to grab the eye of the consumer and direct it toward a service or item. Lending businesses generally pay high commissions to e-marketers. The incentives are high, and some are selling a single "lead" for as much as $50.00. Some e-marketers create websites, which suggest that they are the lender or broker.
There is some concern that emarketers are publishing pages that appear bank-like, yet are simply designed by web entrepreneurs, that do not have lending credentials. In many cases they are soliciting a social security number and other personal information from a would be borrower to be sold to lenders or brokers who can process the applications. Some of the largest marketers have telemarketers phoning, banks and lenders with the offer of "fresh" or "live leads". This may actually result in lenders "competing" for the application from the borrower and offer additional opportunities.
However most web marketers have not met any of the various state licencing criteria that might require a background check, or insurance bond to protect consumers from various forms of non-compliance or other consumer harm. With identity theft prevalent, it is important that consumers be careful with their loan applications. They should read the "About us" portion of the website to determine if the e-lender is a lender at all. If not, they should proceed cautiously in terms of giving out their personal address, or unlisted phone number.
Consumers should never reveal a social security number or allow a credit report to be ran by a non-lender that has not been carefully reviewed. Caution should be taken when working with the emarketers in order to begin an online application.
[edit] Key components of safe eLending
There are several key things a consumer should verify before entering into a lending related transaction online. The prerequisite should be verifying the e-Lender is in fact a legitimate business and is safe to do business with. For example:
- Be sure it is the actual company and not simply a marketer for the company. Read the "about us" page for information.
- Look for signs of legitimacy, such as a clearly posted telephone number.
- Phone the company, to see the greeting states the company name.
- Look for a posted business address on the website.
- Look for business hours posted on the sight.
- When filling out an application, be sure your personal data is being processed in a Secure Socket Layer. This encrypts your personal data so that it cannot be seen by others. To determine if your data is safe look at the browser bar at the top of the page. The http should now read https. The "s" stands for secure.
- When contacting the loan consultant, ask for a specific time frame within which you can expect an approval, written commitment if applying for a mortgage, and closing or funding.
- Ask the customer service representative if they will complete the loan on line, if the funds will be wired, mailed or if you have to attend an actual closing at a physical location.
- If the e-lender is unable to complete the transaction online be sure you do not have to travel to an excessively distant location for the closing, if it is a mortgage.
- Verify the physical location of the website owner matches the lenders actual address. To see the location of the website owner, visit Who Is Information from Network Solutions, naming site owner or another "WhoIs" type site that displays domain name ownership.
The phrase "registrant" usually refers to the owner and should provide the following: The name of the business, the address and a phone number. Ideally the name should be the same. The address may vary if there is a different corporate address than the branch. If it is not similar at all, or if none is posted beware.
[edit] Assuring A Smooth Online or "eLending" Transaction
eLending is similar to traditional lending in that the best way to assure a smooth transaction, may be to obtain a recommendation from a trusted friend, associate or well known web magazine.
[edit] Online Lending Technology
Technical approaches to online lending vary widely. The requirements for online lending solutions vary by type of loan (e.g., mortgages, auto loans, lines of credit). Early solutions were simply lead generating online forms soliciting basic information. Later, the technology typically pulled a credit report and passed the application and credit report to the financial institution. In some cases, these were printed out and re-entered into a loan origination system[1][2] at the financial institution. Current solutions are typically wizard-like or form solutions with good workflow. When the online web loan application is connected to from the internet banking solution, usually the end user's demographic data will automatically pre-fill to minimize data entry. Once the application is submitted, the solution either pulls a credit report or uses one considered sufficiently current on file, and nearly always passes all the data through a credit decision engine which typically yields one of three kinds of outcomes:
- Conditional approval - the application is approved, conditioned on several normal steps such as providing proof of income
- Referral - the applicant is referred to the financial institution
- Denial - the application is denied. Few financial institutions do outright denials online, except from uploaded lists of known applicants that they won't do business with, or when the credit score is inordinately low and the applicant does not have an outstanding debt with that particular financial institution
Generally, loan origination solutions, or even the credit decision engine, also determine the loan interest rate based on risk criteria. This is known as Risk-Based Pricing.[3][4]
