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The Four Ss
The features of unsecured consumer loans can be summarized by the four “S’s”.
- Speed
- Loan screening results are available in as little as 18 minutes after application, allowing for immediate disbursement.
- Simple
- The application process is simple, and once the contract is completed, customers are free to borrow and repay within their credit limit as needed. They can also use ATMs at partner financial institutions and convenience stores, as well as transfer services via smartphone apps.
- Secret
- Secrecy of customers is guaranteed through transactions conducted with consideration to customers’ privacy.
- Safe
- Safe and secure services are provided, such as prior explanation of contract details, timely delivery of service documents, and counseling on borrowing and repayments.
About diversification of exposure
For consumer finance operators, the most prominent characteristic of the consumer finance business is the "diversification of exposure (small-lot and diversified)". While traditional banks focus on large loans to specific corporate clients, consumer finance companies provide small loans to a broad base of customers based on individual credit assessments. This approach helps disperse credit risk and ensures liquidity.
For consumer finance companies, the diversification of borrowers reduces the risk of loans becoming non-performing. Meanwhile, diversifying exposure limits the impact of certain loans being written off. When borrowers and exposure are diversified, loan write-off risk can be better managed, enabling “revolving contracts” that allow customers to borrow repeatedly within the credit limit, which is predetermined according to the customer’s creditworthiness. The customer makes regular monthly repayments of principal and payments of interest in accordance with the contract, enabling consumer finance companies to enjoy a significantly larger advantage than other industries in terms of managing financing and ensuring liquidity. The diversification of borrowers reduces the cost of bad debts, while the diversification of exposure enables a larger number of people to use consumer financing services. These lead to stable profits for consumer finance companies as a result.
