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Will AI change how we borrow? How lenders are using AI in 2025

Written by
Written by
Freelance writer

Colin Graves is a personal finance writer whose work has appeared in publications such as MoneySense, Money.ca, MapleMoney, and more. A former Big 5 Bank manager, he understands the financial challenges today’s families face, and believes that with the right strategies, anyone can achieve financial peace of mind.

Colin Graves
lenders

If you’ve ever applied for a loan or mortgage, you know that it often means filling out lots of paperwork and a lengthy approval process. That’s starting to change, as lenders begin using AI to help with credit decisions.

In this article, we examine how AI will change borrowing in the future. After all, if you’re thinking about applying for a credit card, loan or mortgage, it helps to know how AI is being used and how it affects you. 

Underwriting – Assessing credit risk

Before a lender gives you a loan, they need to decide how risky it is. This process is known as underwriting. The lender looks at your financial information to figure out how likely you are to repay the loan on time. 

Predictive AI models can help with this process. They look at past data to predict what might happen in the future. The AI looks at things like your repayment history, income, debt and spending habits. From there, the AI gives your loan application a risk score. This score helps the lender decide whether to approve the loan and what interest rate to offer. 

Document reviews

When you apply for a loan, lenders usually ask for documents such as pay stubs, bank statements or tax documents. However, reviewing financial documents is one of the most time-consuming steps in the loan approval process. Lenders often spend hours analyzing the paperwork to understand a person’s financial health. This slows down the approval process, ties up valuable staff resources and creates long wait times. 

AI can help speed this up. For example, lenders can train AI systems to automatically read, sort and analyze your documents. This reduces the amount of manual work staff are required to do and helps lenders make faster, more accurate decisions. It also speeds up the process for borrowers.

Personalized credit offers

Lenders often send clients offers for credit cards, loans or lines of credit. These offers may seem random, but they’re usually based on the customer’s past behaviour. For example, someone who always pays off their credit card in full might receive an offer for a higher credit limit or a card with a low interest rate. On the other hand, someone with a good credit score who always pays on time but carries a balance might get an offer for an increased credit limit or a 0% balance transfer offer. 

Fraud detection 

Many lenders are using AI to spot fraud. One way is to identify and prevent fraudulent credit card transactions. Machine learning models are used to analyze massive amounts of data, including transaction amounts and locations, merchant information, shipping addresses and more. This gives them a complete picture of each transaction. 

From there, the AI can identify the most subtle anomalies and alert the fraud team. The lender can then freeze the credit card or contact the customer to verify that the transaction was legitimate. 

Collections 

If you’ve had to deal with a debt collector in the past, you know how stressful it can be. Many people feel embarrassed about missing payments, making the conversation even harder. It doesn’t help that some debt collectors come across as rude or pushy when asking for money. 

AIs can help make this experience better. For example, an AI chatbot can spot signs that someone is upset during an online chat. From there, it can respond to the client in a helpful way and offer solutions that fit the customer’s situation. 

AIs can also handle payments and reminders, even outside of business hours. This makes it easier for people to stay on track and helps debt collectors focus on harder cases. It can also lead to improved collection rates. 

Lenders can also use AI to spot when someone might start falling behind on payments. They can send a payment reminder, offer new ways to pay or connect the customer to an advisor before they fall behind.

Customer service 

One of the most obvious areas where you may encounter AI when borrowing is when you visit a lender’s website to see if you qualify for a loan or mortgage. Many lenders are using chatbots to prequalify borrowers online. 

For example, a chatbot might ask you a few simple questions, like how much money you need, your annual income, or what kind of loan you are looking for. Based on the answers you provide, the chatbot may let you know whether you will qualify. 

These days, chatbots can answer most common questions, such as “What’s the interest rate?” or “How long will it take me to get approved?” You can also interact with a chatbot outside of regular business hours. If a question is more complicated, the chatbot can connect you with a human advisor. 

The future of lending with AI 

AI is starting to change the way we borrow money. One example is chatbots and virtual assistants. These tools can talk with borrowers, answer questions about loans and assist with the early steps of applying.

​​Many lenders are being careful about using AI throughout the credit process. A 2024 study by McKinsey & Company found that while lots of banks are testing AI, only a few are using it across their whole business. Some lenders worry that AI could be unfair and create ethical concerns and compliance risk. For example, could an AI assign higher interest rates to people in lower-income areas based on broad historical data? These concerns make lenders more cautious about how they use AI. That said, the benefits are clear. 

Ultimately, it’ll be great once this initial influx of AI tech settles into place and hopefully helps optimize the lending landscape for lenders and borrowers alike. As for right now, it’s helpful to know how AI is being used currently and what it means for you. The more you know, the more confident you can be when choosing a lender. In the meantime, if you’re debt has become unmanageable and you need help coming up with a plan to get it back under control, our Credit Counsellors can help. Call for a free consultation to get started.

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