Could AI in Lending Hurt Your Chances of getting a loan?

Ralph Estep Jr.:
00:00

Have you ever wondered if a robot could decide whether you're worthy of getting a loan? Well, that sounds like something out of a sci-fi movie, doesn't it? Well, folks, the future is here. And it's called artificial intelligence in lending. Stick around today because we're diving deep into this brave new world of algorithms and credit scores, and asking the tough questions about fairness, faith, and the future of finance.

Ralph Estep Jr.:
00:26

Knowing how these AI tools are being used may very well make the difference between whether you get a loan or not. So that's our topic on today's show. The Bible verse comes later in the show. Before we get started, a quick thank you to everyone who reached out after yesterday's episode about the impact of smartphones on our kids. It was a tough conversation, but I think it was an important one. The digital age brings with it unique challenges.

Ralph Estep Jr.:
00:54

And as parents, it's our responsibility, our absolute responsibility, to guide our children towards healthy relationships with technology. We certainly can't bury our heads in the sand and pretend like technology doesn't exist. But we've got to be better at guiding our children. So if you missed it, you can visit AskRalphPodcast.com, where you'll find all of our past episodes. Of course, you may want to consider subscribing to the show, so you don't miss any future episodes as well.

Ralph Estep Jr.:
01:21

Speaking of important conversations, tomorrow, we're shifting gears to a topic that's crucial for those of you who are nearing or in retirement. And that's these dreaded things called required minimum distributions or RMDs. We'll break down what they are, why they matter, and how to plan for them effectively. You don't want to miss it. Now let's get back to today's topic: artificial intelligence in lending. It sounds like something straight out of Star Wars, doesn't it?

Ralph Estep Jr.:
01:47

But the truth is this, folks: AI is rapidly changing the landscape of financial services, and lending is absolutely no exception. We're talking about algorithms that analyze mountains of data—things like your income, your spending habits, even your social media activity—to determine your creditworthiness. Kind of scary, don't you think? On the surface, this might seem like a good thing. Proponents of AI in lending argue that it eliminates human bias, making the process faster, cheaper, and more objective.

Ralph Estep Jr.:
02:22

And in a world where we're constantly battling against prejudice and discrimination, the idea of purely data-driven systems can be appealing. But as with any new technology, there are potential downsides we must consider. And that's what I want to focus on today. Because as Christians, we're called to approach financial matters with wisdom, discernment, and above all, compassion. You know, back when I was the executive vice president at a credit union, I saw firsthand the importance of the human touch in lending.

Ralph Estep Jr.:
02:51

Yes, we had data, we had credit reports, we had income statements, debt-to-income ratios, paystubs, and even credit scores. But we also took the time to sit down with our members to understand their unique circumstances, their struggles, and, more importantly, their aspirations. To be very honest with you, I regularly disregarded the numbers right in front of me if my gut told me that the borrower was a good risk.

Ralph Estep Jr.:
03:22

I remember one young couple in particular. They were hardworking, dedicated, and desperate to buy their first home. But their credit history was, well, let's just say it wasn't pretty. A few financial missteps early in their marriage had left them with a credit score that screamed high risk to most lenders. They had been turned down by everybody. On paper, the truth is, they were a solid no. But when I met with them, I saw something more than just numbers on a page. I saw their commitment to each other, their determination to build a better future, and their genuine remorse for past mistakes.

Ralph Estep Jr.:
03:58

They had a solid plan to manage their debt and improve their financial situation. And so, despite what the data might have suggested, we approved their loan. And you know what? They never missed a payment. They turned their financial life around. They built their dream home and became some of our most valued members. Now, I ask you, would an algorithm have made that same decision? Would it have seen past the numbers to the heart of the matter, recognized their potential for growth, and given them a chance when others clearly wouldn't?

Ralph Estep Jr.:
04:31

That's the danger of relying solely on AI in lending. It risks creating a system that's efficient but also cold, impersonal, and unforgiving. A system that favors those who already have strong financial footing while leaving behind those who are struggling to get back on their feet. And that, my friends, goes against everything we stand for as Christians.

Ralph Estep Jr.:
04:55

Remember the words of Proverbs 22:22: "Do not exploit the poor because they are poor and do not crush the needy in court." We are called to be compassionate, to show mercy, to offer a helping hand to those in need, including those who are struggling financially.

Ralph Estep Jr.:
05:34

I'm not saying that numbers don't matter. The truth is, folks, in most cases, those numbers will be right in the decision-making process. But without that human connection, I'm sorry, but we're going to miss opportunities to help those who are willing to work hard and honor their finances. Now, I'm not saying that AI has no place in lending at all. Far from it. It can be a valuable tool for automating tasks.

Ralph Estep Jr.:
05:59

It's valuable for analyzing data and even identifying potential fraud. But here's my bottom line: it should never replace the human element, the ability to exercise judgment, understand empathy, and have a true understanding of a situation.

Ralph Estep Jr.:
06:17

So you might ask, "Ralph, what can we do? How do we ensure that technology serves humanity, rather than the other way around?" So here's what I've come up with. First, we need to be aware of the potential risks and pitfalls of AI in lending. We need to ask tough questions about how those algorithms are designed, what data they're using, and whether they perpetuate existing biases.

Ralph Estep Jr.:
06:41

Secondly, we need to advocate for greater transparency and accountability in the lending process. Consumers deserve to know how their creditworthiness is being assessed, and they have the right to challenge decisions they believe are unfair.

Ralph Estep Jr.:
06:57

And finally, we need to remember that behind every loan application, there's a human story. Just like that story of the couple that came to me at the credit union. They're stories of dreams, challenges, and true human aspirations. Let's strive to create a financial system that treats people with dignity, respect, and compassion, regardless of their credit score.

Ralph Estep Jr.:
07:24

Well, folks, that's all the time we have for today. I hope this episode has given you some food for thought about the role of AI in our lives. And listen, folks, if you're like me, you're seeing it everywhere and the importance of approaching financial matters with a Christian perspective.

Ralph Estep Jr.:
07:38

Now, before you go, I want to remind you to head over to AskRalphPodcast.com and sign up for our email list. You'll get show notes, bonus content, and exclusive access to resources that will help you master your finances God's way. And while you're there, why not share this episode with a friend or family member who might find it helpful? Don't forget to subscribe to the show on your favorite platform or check us out on YouTube or Rumble. Remember, friends, as I always say, stay financially savvy, and God bless you abundantly.