Anyone who has applied for a loan or mortgage knows the process can be daunting. You have to fill out a seemingly endless amount of paperwork, and sometimes you have to provide verification for income that's perhaps not so easy to verify.
It can be even harder for anyone needing a personal loan. In those situations there's not always a hard asset (like a house) backing the loan; instead, the lender is making a judgment based on the applicant's income, credit history, expenses, and debts. It's a riskier situation for banks and other lenders, which explains why they often want a daunting amount of information in their applications that generally has to be entered by hand.
Intuit (NASDAQ: INTU), which makes TurboTax, QuickBooks, and other money management software, wants to disrupt that process and make applying for personal loans, mortgages, and other forms of borrowing easier. The company has a new service which allows users of its TurboTax software to pre-fill loan applications on a consent-based basis.
"Seventy-six percent of financial applications -- loans, credit cards, etc. -- are rejected," said Intuit Vice President Varun Krishna in an interview with Motley Fool at Money 20/20. "The current model is very old school -- a lot of paper, very prone to error. A lot of the data you need sits inside a tax return. Combine that with a credit report and your income and you can pre-fill an application."
Intuit wants to make it easier to apply for loans. Image source: Getty Images.
What's the goal?
When Intuit began asking its customers if they would share access to their data in order for the company to see if it could save them money, the answer was resoundingly "yes," according to Krishna. "Ninety-five percent of consumers we have asked have let us search for opportunities to save money," he added. "The idea is that we have your data -- you own your data and decide how you'd like us to leverage it -- we crunch the numbers on your behalf."
The software company can do more than dump data into a loan application. it can verify that the information you are sharing is the same as what you sent to the IRS.
Essentially, Inuit is working to front-load the application process while taking a lot of the work out of it. Krishna noted that 1-in-5 Americans use TurboTax, and 90% of loan applications can be pre-filled using that data. That allows consumers to pre-qualify -- and know what their options are, whether they can save money, and whether the loan they're seeking makes sense given their economics.
"Not every financial product is for every consumer," he said. "We don't want to help consumers get into a higher interest situation than they can likely afford. The idea is to protect consumers and save them from themselves."
Krishna specifically cited car loans as an area where customers focus on getting the car they want, not the impact the loan they take on may have on their finances. It's important, he noted, that the goal of this new offering isn't just getting consumers approved for loans; it's about improving their overall financial health.
What does this mean for you?
If you use TurboTax, Intuit can essentially do a financial audit for you, examining whether you could save money by refinancing some (or all) of your current loans. It can also save you time by telling you when you're likely to get rejected, and through its partnerships it might be able to get you a better deal, a lower rate, or an approval you may not otherwise have received.
This concept isn't unique -- Quicken, which Intuit owned until 2016, has offered its highly automated Rocket Mortgage for years. What's different here is that access to data from TurboTax gives Intuit the ability to bring credible, verified data to an automated process. In theory, that should remove friction for both consumers and lenders.
