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Online loans in the Information Era

- by Kelly R

The title of this article seems like something that is more suitably discussed in the world of technology. But this is not the case; the information era affects even the world of online loans.

The information age, which is incidentally the era we live in now, gets it’s name from having a wealth of information available to anyone anywhere, about almost anything or anybody. Everything we do, (especially in the virtual world) is marked and indexed somewhere, and can become available to the public very easily.

Cashfloat examine the effects of the information era on online loans.

Let’s say a candidate sends a CV to apply for a new job. The potential employer can easily do a web search on the candidate and find out things that the candidate might not want him to know. He might see pictures of the previous night out, where all the guys got drunk together at the bar, after Manchester City’s win over Liverpool at the finals.

Don’t worry – Understand!

You might think this is a severe privacy violation, but we cannot complain, as we are the ones who publicise our pictures on Facebook in the first place. However, there are cases where this easy access to information about us, is to our benefit. Let’s give an example: Would it be fair, if we make sure to drive carefully every day, and pay the same price for our car insurance as our neighbor, who regularly drives recklessly and has already totaled two cars? Of course not. And it would be important to you for the insurance company to know that.

Online loans – technology impact

Similarly, such information is very important when it comes to financial issues. When we borrow a loan online, it would be to our advantage if the financial institution from who we ask the loan, would know that we always pay all of our commitments on time – from utility bills to groceries to previous loans. Here, in fact, we return to the subject of the article, which is how financial behavior is affected by the information age. Before computerized systems were available, database management based on paperwork and human labour was impractical. Now, computer systems allow managing such a database very easy.

Protecting your privacy

In order to find the balance between the invasion of privacy of the individual and financial data base management, which is in favor of the individual, the government took responsibility of the task. Thereby, they can allow the management of financial databases, but only under the supervision, licensing and precise rules stipulated by themselves.

Companies operating these databases are called ‘credit reference agencies’. These agencies work in cooperation with their clients. For instance: Suppose a customer asks for a payday loan. The lender turns to one of the agencies and checks the customer’s financial history. If the customer meets the criteria of the lender, and passes the credit check, he will be eligible for the loan. As long as the client pays on time, everything is fine. However, if there are any problems, the lender reports the problem to the agency. This information is shared, and becomes available to all the other financial institutions that work with the same agency. Usually, a financial institution works with several agencies, and therefore the accuracy of the information it receives about the customer is more accurate.

Financial information – no secrets

Finally, there is the most important point to keep in mind while conducting our financial business: Assume that there are no secrets in the world. Everything we do is being recorded somewhere, and if we don’t pay one of our commitments, it might harm us in the future. For example, if we are late paying our phone bill one month, it is important to know that it can affect a future bank’s decision regarding a loan for a car we want to buy. We might be getting a rejection without even knowing why. No pleas or convictions would help! Our file is not clean, and the bank may not be willing to take the risk.

On the other hand, if our financial behavior is impeccable, banks and financial institutions would simply yearn to work with us. We would easily obtain the best borrowing conditions. Credit card companies would be lining up to give us another card and would respond positively and quickly to our requests. Even mortgages would be cheaper!

So remember: It is always better to not get into a commitment that that you cannot fulfill, and risk your lenders’ trust in you.
Kelly R
Kelly Richards is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog’s creation. Kelly’s passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly’s insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!
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