How to Create a Money Lending Mobile App: Steps, Costs, Challenges

Borrowing money is a no-brainer in 2023. Whether you need funds for starting your own business or buying a brand-new video game console, there are plenty of options to consider. Taking a bank credit, starting a crowdfunding campaign, reaching out to a credit union, or applying for a loan on peer-to-peer lending platforms are a few.

The last solution has become significantly more popular in recent years because of social distancing, lockdowns, and so many people shifting to being online more. So now is the best time to enter the market with a money lending app.

Mobile loan apps let you borrow money without even leaving your room. They are fast, secure, and flexible. If you want to create such a solution and stand out from your competitors, this article will help you understand the best features to include, what challenges you may face, and how much it will cost.

What is a money lending app?

Before we start a detailed discussion of what’s needed for a money lending app, let’s take a closer look at the solution as a whole. A loan money app is a mobile application or a progressive web app that connects people and organizations who are ready to lend money with those who need to borrow it.

Usually, both parties involved in a loan deal are just private individuals, but sometimes lending services can allow businesses to participate.

Types of mobile lending apps

Even though most money lending apps function similarly at their core, we can still differentiate several types of loan apps deserving of your attention. The type you choose mostly depends on which types of loans you plan to work with.

• Personal loans

This is one of the most popular types of loans offered on mobile lending apps. In a nutshell, this category covers a huge variety of personal needs like payday loans and debt consolidation. Usually, such loans have more flexible requirements, lower rates, and a small amount of paperwork.

• Business loans

If you want to work closely with businesses and help them find needed funds, you can either create an app specifically for business loans or allow companies to join your P2P lending app as borrowers. It will involve more work since you will have to verify if the company is legit, but this model can also potentially bring you more money. Your lending app can grant startup loans, equipment loans, or term loans.

• Educational loans

The cost of higher education and student debt is a hot topic these days. A lot of people simply can’t afford the education they want which can cause them to give up on their dream. If you want to help students achieve their goals and get a degree, you can opt for building an educational loan app.

• Mortgage and home loans

Home loans are another hot topic being discussed not only in the US but around the world. Even though housing prices began to slowly decline, buying a real estate property still costs a fortune and mortgages have become even more unpredictable with the current economic and political state. With a home loan app, you can help people deal with their mortgage payments and provide loans for things like furnishing or decorating houses.

• Car loans

The last but not least category of loans in this list. Today, cars are not luxurious items, they’re a necessity for a lot of people. However, being in demand doesn’t make them affordable. That is why providing car loans is a profitable niche for building a loan app.

How mobile lending apps work

If you ask us to briefly describe the way mobile lending apps work, it will look like this:

1. A user installs the app and creates the profile.

2. They indicate what sum of money they need to borrow or are ready to lend (and for what purpose).

3. They choose the appropriate rate.

4. The app offers suitable lenders/borrowers to them.

5. The two sides make a deal.

The loan process is usually quite simple: A lender lends money via the app, a borrower receives it, and the app gets a small fee.

Now, let’s get into more detail.

The onboarding process should be simple and fast. The fewer steps users take to create an account, the more content they will engage with as part of the user experience. Usually, when the registration process is complete and a user specifies the necessary personal data, they can then choose the type of loan they want and what sum of money they want to borrow/lend. 

Then, a user connects their bank account and sets up autopayments so they won’t miss the payment date. The app takes care of the rest: It sets up the borrowers with lenders and helps them arrange the deal.

Also, the app for lending money should provide a complete history of payments so the users can easily check on it if necessary. 

Banks vs loan apps

We already mentioned that money lending software has become more popular over time. There are several reasons for these apps to attract new clients and bypass traditional banks. We have made a short comparison table of these two lending options.

Money lending market in numbers

To support our point about money lending mobile app development, we found some pretty numbers to illustrate the market situation.

• According to Statista, the transaction value in the marketplace lending (consumer) segment is forecasted to reach $31.28 billion in 2022.

• The global mortgage lending market was valued at $11,487.23 billion in 2021, and is projected to reach $27,509.24 billion by 2031, growing at a CAGR of 9.5% from 2022 to 2031, says Allied Market Research.

• Business Wire states that in 2021, Western Europe was the largest region in the lending market followed by Asia Pacific.

• Also, Business Wire claims that the most influential factor limiting the growth of the global lending sector is a lack of public understanding about peer-to-peer lending. On the other hand, the growth of small and medium-sized businesses contributes to P2P financing around the world.

• The US student loan debt has reached $1.745 trillion, according to Education Data.

• USA Today says that the average monthly cost for new vehicles in the US is $550.

Source: Education Data

Top-tier examples

Since the lending market is quite successful, there are already plenty of mobile apps that provide loans to private individuals and businesses. Here is a look at some of the most outstanding examples of mobile money loan apps.

Prosper

This is one of the first consumer lending apps in the US. It was launched in 2005 and a lot of users still choose this app for lending operations. The sum range here varies from $2,000 up to $40,000 with interest rates from 7.95% to 35.99%. It covers a lot of loan purposes, from healthcare to home repair.

Source: Prosper

One of the most special features of Prosper is the joint application, which allows two people to apply for one loan. Such an opportunity can help a borrower increase their credibility and enhance their chances to receive the desired sum.

Avant

Avant is a standalone mobile app for iOS and Android that allows its users to apply for loans and issue credit cards. The platform covers loans from $2,000 to $35,000 for installments, debt consolidation, home improvements, and emergencies. Speaking about credit cards, Avant provides credit limits from $300 to $2,000 for personal use. They have a fast application process and zero fraud liability for unauthorized charges.

Source: Avant

Happy Money

This is another money lending application that was founded in 2005. Just like Prosper, Happy Money was one of the market leaders back then and continues to be at the top. The service provides loans up to $40,000 with rates being between 5.99% and 24.99%. Happy Money is transparent and convenient. It also provides you with certain educational content.

Source: Happy Money

However, please note that even though this app is user-friendly and has plenty of features, beginner borrowers can find it complex. Also, Payoff is not nationwide, so you may not have access to it from certain locations.

Mobile loan app development: Pros and cons

Any technological advancement has its own strengths and weaknesses and consumer mobile apps are no exception here. Here is what you can possibly face if you decide to embark on the development process.

• Advantage: Convenience and ease of use

Unlike traditional banks, loan apps allow you to avoid queues, paperwork, uncomfortable offline interactions, and banking service expenses. There is no need to spend time on the road, convince lenders to issue the necessary sum of money, or look for a place to keep all your documents safe. All processes are performed online with a few screen taps, so consumer loan apps save you time.

• Disadvantage: Limited accessibility

Unfortunately, not everyone can access online lending. Besides the simple lack of Internet connection, not every person has the necessary credit score. In this case, users may pay even higher rates.

• Advantage: Independence and personalization

Loan applications provide both borrowers and investors with a platform to set their own conditions for the lending process. They can independently define the rate, amount of money, and payment deadlines. It makes money lending apps flexible and easily tailored to users’ needs. Such services attract people who don’t like to follow rigid banking requirements.

• Disadvantage: Debt collectors

Yes, they still exist. The involvement of debt collectors is a more common thing for traditional lending, but it doesn’t mean it’s not used in the case of online loans. If you can’t pay your debt in time, there is a pretty high chance that debt collectors will come to you to ask for the payment. And the experience can be far from pleasant.

• Advantage: Favorable rates

The higher interest rates are usually determined by additional costs banks have to pay to function. For example, equipment maintenance, rent, employees’ salaries, and new product development. Since mobile loan apps don’t require these processes, the development becomes cheaper and rates are going lower. 

• Disadvantage: Loan amounts are quite low

We already mentioned that traditional banks prefer bigger loans. Since larger sums of money require more responsibility, not all investors are ready to trust the new online loan services. Most apps and platforms set a maximum limit of $40,000-$50,000.

Subscribe to new posts

Subscribe

Must-have features to create a loan app

Now that we know more about the online lending market and reasons to create an app for this niche, we can move on to the feature list. Let’s start with the basic functionality that any money lending app should have.

For borrowers

• Registration and onboarding. Both of these processes must be clear and simple. Users should intuitively understand what to do once they open the app. Another important aspect is security. The app should provide multiple options for signing in. You’ll also need to make sure new users can easily learn about your privacy policy and terms of service.

• Bank account integration. Make sure users can effortlessly connect their bank account to the app for transferring money and payments.

• Loan recommendations. The app should be able to analyze the data provided by users and create a list of the best offers available to them. The data in this case can include the loan amount and type, desired rate, and credit score.

• Applying for loans. Borrowers should be able to file an application right inside the app.

• EMI calculator. It will help a borrower understand what equated monthly installment (EMI) they will be paying.

• Transaction history. All payments (on time, delayed, missed) should be stored in one place so the user can check them if necessary.

For investors

• Account management. Besides basic profile information like name and contact information, it should also include tax information,  investor’s portfolio, and payment options.

• Analytics tools. Dashboards are a perfect analytics tool for lenders to see what is going on with their portfolio and how debts are paid.

• Request approval/denial. Investors should be able to accept or deny loan applications. If lenders don’t want to spend their time looking at all potential matches, they should be able to set up automatic acceptance.

• Loan search. Borrowers can also be proactive and search for opportunities to invest their money.

For admins

• Chatbot. An AI-powered chatbot will be able to answer the most common questions asked by users.

• Customer support. If an issue requires personal intervention, a live agent should be able to join the chat.

• User management. Admins should be able to manage user profiles and warn and ban those who violate the app’s terms of service.

Killer features for a money lending service

The features we mentioned above will be the core of your fintech loan app. However, if you want to stand out from the crowd and make sure your target audience will pay attention to you, you may think about implementing the following features.

• Electronic signature. To facilitate the application and approval process, you can enable users to sign the contract virtually.

• Auto-payment. To reduce the anxiety in borrowers as their payment due date approaches, you can include an auto-payment option that will automatically withdraw the necessary funds.

• Rating. It will help lenders understand if borrowers are reliable and responsible.

• Artificial intelligence. Empowering analytics with AI will enable detailed analytics on various aspects of the platform for all types of users.

How to build a loan app: Steps to follow

We have described what features to include in your future and why people will love it. Now, the fun part begins: We need to discuss in detail how to create a money lending mobile app. This part will provide you with a viable strategy that will help you define your vision and follow it till the launch of a full-scale solution.

Discovery phase

If you want to build a loan app and successfully monetize it, a discovery phase is a must. The discovery phase in software development is the initial stage where you focus on learning more about your end-user, clarifying project goals and scope, and identifying potential risks. 

Thanks to the discovery phase, you will have your idea polished and backed up by data. Usually, this stage includes market research and competitive analysis. The first one is responsible for getting to know your target audience, the second one will tell you more about your competitors. The discovery phase can also include initial wireframes and prototypes to visualize the concept and fix the most obvious issues.

Hire a team

The next step is to find experienced specialists who will create a loan app for your business. You have two main options here: in-house team and outsourcing. An in-house team means you hire software engineers, UX/UI designers, and QA engineers. Outsourcing implies that all tasks are done by a third-party provider. Both options have their own pros and cons, but your final choice will depend on your project requirements.

The development team should also be involved in the discovery phase. This way they will be on the same page with you and have a clear understanding of the requirements.

UX/UI design

When we speak about fintech apps, functionality means more to users than appearance. However, this doesn’t mean you shouldn’t pay attention to the design. First of all, it should be simple. Users can be confused by bright colors, huge icons, and unclear instructions. To avoid having these issues, we recommend building a prototype. A prototype’s main purpose is to see what users will experience when using the application and fix all bottlenecks before the main work starts.

MVP development

Since loan app development is a complex process that will eventually require a lot of resources, we would strongly advise you to start with an MVP. A minimum viable product is the first implementation of the product that includes only core features. 

It doesn’t mean it will have poor design or be full of bugs and errors. It’s a functional solution, but with the minimum required feature set. Such an approach is a great way to understand whether the audience would like to see a full-scale product or if further development will only be a waste of time.

Testing and release

This stage kind of co-exists with the previous one. The testing process starts at the beginning of the development. It allows the team to quickly find bugs and fix them before they snowball into something bigger. You can apply both manual and automated tests to your mobile loan app to get better results. When the code is finished, the legal compliance is checked, and features are tested. Then it’s time for a launch.

Feedback-based iterations

Your MVP is up and running which means you are about to start receiving your first real-user feedback. To encourage this activity, you can ask users to leave feedback in a special form, write a review on Google Play or App Store, or even send an email. Both positive and negative feedback are valuable sources of information. They will show you what you do right and what needs to be fixed.

Once you analyze users’ reviews and make the necessary changes, you can continue with full-scale loan app development. 

Promotion and marketing

It’s hard to survive the competition without a good marketing strategy. There are a few ways you can consider spreading the news about your app to a wide pool of people:

• Social media marketing

• Landing page promotion

• Advertisements

• Media coverage

• App store optimization (ASO)

There are more, but these are the most effective marketing tools to get people to know about you and choose you over others.

Loan app development: Challenges to consider

Before we move to a more detailed discussion of loan app development costs, let’s take a look at some aspects you need to consider.

Security

All fintech solutions work with private and sensitive user data which means security should not be taken lightly. The user data should be encrypted at rest and in transit to protect it from hackers. You can use penetration testing to see how to improve your app’s security. It will imitate a cyberattack to indicate the weaknesses and provide recommendations for fixing them.

Legal compliance

This part is actually connected with the previous one. If you want to create a loan app, you must ensure your service is in compliance with state laws and international agreements. If you plan to be present abroad, the two most common standards to look at are General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA). You need to follow the first one if you want to enter the EU market and the second one for California specifically. 

Laws may vary depending on the countries and regions, so if you want to make your app available there, you should check what legal requirements to comply with.

Trust

Since your lending app will be new on the market, potential investors may have doubts. Some P2P loan services lack transparency in risk management which repels lenders. To avoid such a situation, show your users that you put all your effort into verifying candidates and detecting fraudulent activities. 

Wrapping it up

That’s it! We have discussed all aspects of money lending app development. You now have enough information to start planning your next project. Remember to pay close attention to the app's security, convenience, and user-friendliness. Build a trusting relationship with your audience and you will never lack clientele.

If you already have an idea and are looking for a dedicated team of experts, feel free to contact us! We will help you analyze and polish your vision and create a perfect money lending solution.