- Emma Anderson
- July 8, 2020
Loans have become a necessity in the inflation-filled, tremendously expensive and highly prejudiced world we live in.
If you are rich and have more money than you can ever spend in a lifetime, you will never feel the pang of prejudice.
However, being a part of the working class, with a hand-to-mouth salary, you are going to feel the heat of discrimination.
The bias I want to highlight about is not related to our sex, race or religion. This one is more on the lines of income.
The difference between the appearance of a low-income and high-income house will give you an idea of what I am talking about.
However, the more in-depth understanding of this notion will only be perceived when we look at the financial services provided to both of these classes.
Even when you are well to do, there still might be situations in your life when you would need a loan and because you are well to do your loan would always be granted.
And someone who does not have the most prominent figure as his salary and a nominal bank balance at the end of every month would have to face the brunt of a rejection every time he applies for a loan.
Do you see the bias?
Why such prejudice?
Should lenders not understand that loans were virtually invented to assist the people who need it and not to lift the already uplifted?
I understand that providing loans is a business and lenders have to think about themselves before giving out loans like you are getting a free sample to test out.
The lender has to be sure that his money would come back to his pocket after having multiplied with the interest that he imposed.
This is understandable and reasonable.
Yet, I feel that by catering to just their needs, the lenders are unintentionally discriminating against many borrowers, who just need one chance to prove to them that they are competent enough to make them the profit they want so eagerly.
A college graduate, who started working a year ago, wants to apply for a loan to buy a new car. He is confident that he will get that loan, but his application is rejected.
He is rejected because;
He has no history of loans;
He does not have a credit score;
He does not fit the mould that the lenders have formed for the borrowers.
So his dream of a car remains a dream, despite him having the means to make timely repayments.
Do you see how flawed the system is?
How is a first-time loan seeker supposed to create a history when no one is going to grant him a loan?
It is the prejudice the borrowers have to endure every day in the financial services’ domain.
What can be done?
We can start by providing guaranteed acceptance loans.
What is meant by these loans is that a lender can provide loans to people without judging their past.
A person with a bad credit history may have turned his financial situation around.
A person with a lost job can make the wheel of fortune turn to his favour.
A person with no record of loans can turn out to possess an excellent credit ranking.
If the lenders only focus on the present and the income status of the borrower, the bias would automatically wane.
Nobody wants to borrow a loan that would become a burden on him, so the majority of the times, the loan seekers only ask for an amount that they know they can repay.
So, if income is the only parameter, then loans are always going to be guaranteed to the borrower.
Instant doorstep loans are an example of the waning bias. These loans are provided to people on benefits, without a bank account and in the confines of their homes. The loan amount is indeed low, but that is acceptable, what won’t be acceptable is the non-availability of loans to this section of society.
I hope that the stride these loans have taken will be taken on by others as well, and soon the prejudice will completely cease.