If you want to know how to start a loan app, there has never been a better time to learn. As more people get squeezed out of traditional banking loans due to high-interest rates and an unwillingness by large financial institutions to lend, peer-to-peer money lending apps offer consumers viable lending alternatives and savvy businesses a great opportunity.
Creating a money lending app is not as simple as other mobile apps or web apps, but it can be a very profitable business venture. People are always looking for personal and business loans, and unfortunately, many have difficulty securing a loan through traditional lending channels. As a result, money lending mobile apps have grown in popularity and gained consumer interest.
This post will explain what you need to know to start a loan app. Plus, we will cover the top features that need to be included in your money lending app if you want it to be a success.
Building a Loan App: Getting Started
Building a money-lending mobile app is unlike building other apps. Due to different regulations and laws surrounding financial transactions, investments, and loans, loan app development requires more legal consideration than, say, building a mobile game or business SaaS.
In addition to the legal complexities associated with money lending mobile apps, your company will also need to consider the traditional mobile and web app development considerations, such as branding, product design, development, etc. This post will not detail the different app development considerations that go into building a successful application. If you are interested in learning more about development, check out our informative blog post, “How to Create An App.”
To create a money lending app, your business needs to start on the legal side. You should have an idea, and maybe even an early design, for your app before you begin dissecting your company’s legal responsibilities. However, it is important to address these issues early because your business might find that certain ideas, features, etc., are not legally or economically viable.
Before you begin development, you need to have a clear idea of what features, capabilities, security measures, etc., your app will include to keep development focused and costs down. The primary things your business needs to do to successfully start a lending app include:
- Retain legal representation
- Hire financial specialists
- Create a loan agreement
- Partner with a financial institution
- Understand laws and regulations
- Prepare for integration
Retain Legal Representation
Retaining a good lawyer is not always necessary when developing an application, but you need a skilled lawyer when building a money lending mobile app. Several possible legal issues can arise with peer-to-peer money lending apps.
A skilled attorney can help your business settle any legal issues that may arise. Plus, they can guide you through your legal requirements during development. Your business could break the law without legal guidance and face judicial consequences.
Hire Financial Specialists
In addition to an attorney, your company should hire a financial specialist to help you understand the complexities of the lending process. A skilled financial specialist will help your company monitor its procedures and policies to ensure they remain up to date and compliant with financial regulations.
Your company should be looking for a specialist with lending or banking experience. Of course, there will always be risks associated with the peer-to-peer lending process. Still, a financial specialist can help your company reduce the risk associated with its money lending app.
Create a Loan Agreement
Once you have a lawyer and financial specialist on your team, you must create a loan agreement document. The loan agreement will inform lenders and borrowers of the terms associated with using your company’s money lending app. In addition, your lending app’s loan agreement must comply with financial regulations and laws.
Don’t attempt to create a loan agreement without the assistance of a lawyer and financial specialist. You don’t want your business to run afoul of the law.
Partner with a Financial Institution
To execute the lending process, hold funds, and make payments, you must partner with a financial institution. You need to partner with a bank, credit union, or other financial institution for several reasons. First, in addition to holding the money of lenders, investors, and borrowers, working with a financial institution will also ease some of your compliance issues since they already have compliance procedures.
Your business is not restricted to partnering with one bank. It might make more sense for your business to have multiple banking partners, which also comes with advantages. However, it will be more costly to maintain more banking partners.
Understand Laws and Regulations
If you have already found a lawyer, financial specialist, and banking partner, it should be easy to keep your company compliant with laws and regulations. The most important thing for your business to consider here is all of the local and federal laws associated with your business. For example, in the United States, local laws might differ between jurisdictions, and if you have lenders and borrowers in multiple countries, you must ensure that you are complying with the local laws in all of these areas too.
Prepare for Integration
If you want to have a successful money lending app, your company has to prepare for third-party integrations. For example, your loan app will need to integrate with payment systems, e-wallets, banking providers, and more. During the development process, your team should be preparing by making your loan app scalable for integration with third-party APIs.
Essential Features to Include in Your Money Lending App
If you want to create a money lending app, there are a few critical features that you must include if you want to be successful. The essential features you need to include in your loan app are:
- Account registration/login
- Payment and billing
- Loan management
- Transfer/withdrawal
Account Registration/Login
Users must be able to create an account on your app and log in securely. You should give users the ability to register an account using their phone number, social media account, or email address. Once users create an account on your loan app, you need to collect other important personal information related to their income, banking account, assets, and any other information your platform will need for the lending process.
Ensure that your development team is prioritizing security throughout the development process. Security will be baked into many of the financial tools you use in your loan app, but you will have to secure the sensitive personal information collected for the lending process.
Payment and Billing
Payment and billing features are essential to any money lending app. Users with outstanding loans need a convenient way to pay back their loans and any interest that has accrued. Integrations with e-wallets, banking providers, and payment systems will be able to handle most of this functionality. In addition to payment tools, your company should also consider including billing features that give lenders the ability to send borrowers payment reminders and past-due notices.
Loan Management
In addition to payment and billing tools, lenders and borrowers should have access to loan management features. Loan management features give users the ability to see all of their open loans, view new loan offers and opportunities, compare available interest rates, fill out loan applications, and more. Your company should also consider giving borrowers and lenders the ability to communicate with one another and negotiate loan terms as part of your money lending app’s loan management features.
Transfer/Withdrawal
Your money lending app should give users the ability to withdraw and transfer money to their personal bank accounts or debit card. Both lenders and borrowers will need to be able to withdraw money from your loan app. They should also have the ability to deposit money. Although, a deposit feature is not as critical if you enable payment integrations directly from a user’s bank account. Work closely with financial institutions to reduce the amount of time it takes to execute transfers and withdrawals. No one wants to wait long for their money to be usable.
Final Thoughts
Building a loan app comes with a lot of complexities. Simplify the process by partnering with an experienced software development partner like Koombea. We have in-depth experience helping companies meet and understand PCI requirements and minimize risk. Now that you know how to start a loan app, find an experienced development team to help simplify the development process.
