How Will Blockchain Decrease Lending Rate Interest?
Bitcoin Press Release: Today’s credit system is far from perfect. A classic way to get a loan is to apply for a consumer loan to a bank. The drawbacks of this way are clear. It takes a lot of effort to collect the necessary list of documents, and a lot of time for a bank to review them. At the same time, there is no guarantee that the loan will be approved. An alternative for the borrower is a microfinance organization and companies that issue loans for collateral (pawnshops). The approval for the loan is received by almost everyone, and it takes less time to process it. But the cost of such loans are very high: interest is charged on the loan, sometimes several times the amount of the loan itself.
Modern technologies allows to optimize the process of obtaining a loan both from the point of view of its registration time and from the point of view of reducing the interest burden on the loan. Moreover, projects that have set themselves this goal already exist. One of them is the SHIFT.cash platform, which specializes in issuing quick loans secured by vehicles.
“This form of secured lending has developed tremendously all over the world, only in 2016 the market volume was more than $ 30 billion,” Tomas Novak, SHIFT.cash CEO noted. “Every seventh person in the world has a car, and for developed countries, this number is even more impressive. The availability of this type of secured lending is extremely high. At the same time, the amount of collateral can be many times greater, and the interest rate – several times lower. Plus, the borrower continues to use the car.”
Despite its prospects, at this stage the system of lending secured by car titles has its own shortcomings, which lead to an increase in the cost of loan servicing for the borrower. Founders of the SHIFT.cash platform during 4 years have been testing and collecting the best experience in the field of secured lending and information technologies and directed it to make this tool as accessible and convenient as possible. The main idea is to maximize automation of all the processes of issuing a loan, eliminating unnecessary intermediaries, and thereby reduce interest on the loan.
Blockchain technology allows you to safely perform all transactions, including the procedure for verifying the identity, charging a loan to a borrower’s bankcard and registering a loan with a special government agency, online and without intermediaries. As a matter of fact, SHIFT.cash is a platform specializing in providing loans secured by car titles and offers related services online. Another result of the four-year work of the project was the creation of an automated system for assessing collateral, which uses a large data processing system (BigData). This allows you to evaluate the value of the car instantly and without an intermediary, minimizing the human factor.
Smart contracts also opened borders between borrowers and investors in the literal sense of the word. Now an investor from Japan or any other country will be able to lend to a person from Brazil. Thanks to smart contracts, this can be done in two clicks on a smartphone. The investor provides a loan through an application in which he can regulate the loan amount, while his loan is backed by actual property. Convenient conditions for investors suggest their active investment through the platform. The more investors – the more favorable conditions for the collateral they will be ready to offer the borrower.
“Verification has already optimized the cost of the service for the customer and improved business performance in many industries. Blockchain technologies and smart contracts are also penetrating more and more into our daily lives and allow us to optimize many processes, including financial technologies. Our platform will also partly act on the principle of Uber: being managed by smart contracts, it will directly connect the pools of borrowers and investors with each other, excluding intermediaries from the process as much as possible, – Tomas Novak, SHIFT.cash CEO comments – This is a tool without geographical barriers. It connects borrowers with collateral properties to investors around the world, due to the simplicity, speed and transparency of the “movement” of assets into the blockchain. For borrowers, this will reduce the interest on loans, and for investors will open access to earnings in the secured lending market, where previously only banks and large specialized companies had the opportunity to work massively.”
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