America’s Student Loans Crisis Is A Toxic Bubble, Ready To Burst With The Help Of Blockchain
Did you know that Americans owe approximately $620 billion of student loans, more than credit card debt? And that the top 50 lenders in the U.S. own nearly 85% of the total debt?
Students in America have borrowed on loans like never before in the last eleven years. Consequently, the cumulative growth of student debt in the country has grown by 157%. By comparison, American automobile loans have grown by 52% in the same years. As a result of the heavy borrowing by students, the amount of student debt is a whopping $1.4 trillion. All told, student loans are the second-largest household debt segment in the country. And the number keeps growing.
The Blockchain solution for social finance
Indeed, these statistics are daunting. But wait, there is a solution: blockchain. With evaluation transparency, security and user data privacy, certain aspects of the lending sector can change to offer fresh opportunity. Using public ledgers, lenders can ensure that borrowers provide complete information so they can make informed decisions. Also, lenders can use decentralized technologies to combat fraud attempts.
In addition, automation using smart contracts can potentially accelerate loan processing time and speed up transactions. Thereby the costs incurred while waiting for clearance reduces, as well as liabilities across the sector. In turn, the market for loans becomes more flexible to extend credit, and borrowers who are locked out of the market by sky-high standards can enter the market. Here are some of the use cases of blockchain in lending markets.
Lending on the Blockchain; five use cases of blockchain in lending
Competitive Lending Rates: Blockchain-enabled lending platforms are to launch soon, widening the net of lenders and borrowers, and thus providing more competitive lending rates, in a transparent, efficient, and cheap fashion.
Replacing Credit Rating Bureaus: A blockchain-powered, decentralized credit score will offer users many benefits that cannot come from the traditional credit rating agency. As a result, lenders can operate on a more comprehensive database, where non-performing loan risks are minimized, and new borrowers discovered.
Faster Mortgages processing: By providing uniform financial records of individuals, blockchain-powered accelerators for mortgage services could simplify and improve on the loan vetting and approval process. Also, blockchain can reduce mortgage fraud, which is a big problem that lenders are facing. Using blockchain, lenders can easily verify the ownership of assets, and make the process more straightforward.
Accurate and Transparent Credit Profiles: With blockchain, unbanked communities can receive digital identities that can allow these users to grant passkeys, and permissions to access personal information by a third party.
Crypto-Backed Fiat Loans: Since lenders don’t take cryptocurrencies as collateral for loans, due to some hurdles such as the fluctuating nature of cryptocurrencies’ value, crypto-backed fiat loans work by providing liquidity to borrowers, who don’t want to liquidate their crypto-asset portfolios.
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