Loans
Your Social Media Activity Affects Your Personal Loan Application
Ad nauseam is the word that comes to mind when we think about the times we have read and heard about the pros and cons of using social media. Here we shall throw some light on the impact of social media activities on a person’s personal loan application.
Today we live in a world sans boundaries. Internet and technology at the tip of one’s fingertips has truly shrunken the world. Social Media platforms including LinkedIn, Twitter, Facebook, Instagram, and even Tik Tok not only help people connect with their family and friends but also people from around the world. It is also effective in keeping people up to date with the latest events. It has become instrumental in shaping a person’s personality as well. The posts they share, the friends or contact they have on their profile, the comments and the likes they make on different posts and the messages they forward are known to shape a person even unbeknownst to themselves.
While social media is fun and perhaps the first thing that a person checks when they wake up, it is also used by lending agencies to understand person’s overall image and personality, and the capability to repay a loan while reviewing a personal loan application. (The virtual image of a person is also used by hiring agencies for recruitment purposes).
So, while social media is a handy tool to keep track of your friends, remember that your next recruiter and loan agencies will keep track of your activities as well. So how do lenders or loan agencies use your social media activities to gauge your personality and decide whether you are eligible for a loan?
Social Media Checks
When an individual applies for a personal loan there are several parameters that a loan agency or bank substantiates to measure the loan repayment capability of the applicant. First and foremost in this checklist is the credit score or CIBIL rating of the individual, followed by status of residency, employment, previous loans etc. Nowadays banks and loan agencies also factor in the social media activities of loan applicants to gauge their creditworthiness, especially when it comes to personal loans.
Fintech companies, especially P2P lending companies, are extra careful while disbursing personal loans as these are unsecured loans. Unsecured loans have no collaterals to assure repayments and hence P2P lending companies leave no stone unturned before approving a loan to minimize risks. These include the stringent social media checks to get the overall personality of the applicant.
What lenders check on your social media profile?
First and foremost, social media checks by Fintech and other lending agencies do not breach the privacy of the applicant. Platforms including Facebook, LinkedIn and Twitter are checked to authenticate user data, lifestyle habits, and spending nature. Likes, shares, images and comments are analysed through structured algorithms and machine learning for comparative behavioural analysis.
One of the key benefits of this new method of a loan applicant’s verification is that first time borrowers with no CIBIL score now have a chance of getting their loans approved.
Impact of social media on personal loans
Trust is the key word when it comes to getting one’s personal loan application accepted. Social media parameters not only establish said trust, but are also critical in determining the rate of interest on the personal loan.
Let’s take a real-life example of a loan applicant at RupeeCircle.
Name: Mr. A
Age: 24 years
Profession: Video Editor
Employed at an Ad Agency for the last 8 months at a salary of Rs22,000 per month.
Loan amount: Rs70,000
Loan Type: Consumer durable
The profile looks good so far, however, when one goes down the rabbit’s hole of his social media activities several red flags start popping up. Mr. A was frequent on 2 social media sites: Facebook and Instagram. And both sites were replete with images of him partying. Several of these images along with the dates and venue were collated and his behaviour pattern was formulated, which the credit underwriting algorithm rejected.
Most Checked Social Media Platform
Two of the most popular social media sites – Facebook and LinkedIn – are instrumental in getting a loan approved or rejected.
LinkedIn is the best source to verify a person’s employment journey and gauge his/her repayment capacity. Current employee, history of employment, monthly income and alternative source of incomes are some of the most prominent parameters that determine the intent and repayment capacity of an individual. While applying for a loan an individual has to submit details of employment and bank account statements; lenders use several means to authenticate the documents and perusing LinkedIn is one of the method of authentication. LinkedIn connection is another parameter that a loan agency checks to ensure credibility of the applicant. Anyone with over 500 professional connections and a long tenure of employment is considered a suitable “lead”.
If Facebook was a country then it would be the most populous one. So it only makes sense that Facebook is the first social media that agencies check to gauge the virtual image of a person. The genuine account of the applicant is analysed for their posts and reactions, and overall social media presence. Again, the friend list of the loan applicant is analysed to find whether the credit rating of the friends are on the higher side (or if most of them are defaulters). This is why it is imperative not to add random people in your friend list. But on a lighter note it is also not polite to ask a person for his/her credit score before accepting a friend request.
Business Loans for the Self-Employed
It is imperative for a self-employed individual to have a strong business presence on social media. Potential lenders will check the business page on social media to determine its performance. Robust business profiles or pages increase lender confidence in the business and raises the possibility of the proprietor getting a personal loan approved. The numbers of follower a business page has as well as its feedbacks are some of the factors that portray the repayment capacity.
FinTech Algorithms
Several Fintech companies in the P2P lending segment make use of credit underwriting algorithms and machine learning to calculate a score for the loan applicant. Besides checking the social media behaviour, these algorithms also check the GPS location, SMS alerts, and the traditional borrower ranking factors. Others parameters such as utility bill repayment history is also assessed by some lenders.
Being responsible on social media is not only important to stay out of virtual troubles but also because it may help you successfully convert your personal loan application.
