Abstract:
Disclosed are systems and methods for providing a loan having an interest rate and a loan period. The systems and methods dynamically adjust the interest rate during the loan period based on actual payment performance of a borrower, thereby resulting in an improved reward structure, greater borrower loyalty and an improved experience for the borrower.

Description:
CROSS REFERENCE TO RELATED APPLICATIONS 
     This application claims priority to U.S. patent application Ser. No. 11/321,969, filed Dec. 29, 2005, the disclosure of which is incorporated herein by reference in its entirety. 
     This application is related to U.S. patent application Ser. No. 11/413,552, filed concurrently herewith, the disclosure of which is incorporated herein by reference in its entirety. 
    
    
     TECHNICAL FIELD 
     Various embodiments of the present disclosure pertain to information handling systems used in finance and banking applications and more particularly, to providing consumer lending products and services that offer an improved customer experience. 
     BACKGROUND 
     With interest rates at historic lows, consumer borrowing has been steadily growing. Consumers have been borrowing money from financial lending institutions fOr everything ranging from automobiles, to dream vacations and multi-million dollar homes. A consumer may typically apply for a loan via the Internet, and often within minutes obtain an approval for the loan. One or more financial lending institutions may compete on-line by providing attractive upfront incentives for the loan. Most financial lending institutions decide on the loan application, virtually instantly, by primarily evaluating applicant&#39;s credit history as determined by their overall credit score. It is well known that the credit score is a numeric assessment made by independent credit reporting companies such as Equifax, Experian and TransUnion, which is used to evaluate the amount of ‘financial risk’ involved in a credit transaction. 
     Applicants having less than acceptable credit score are often classified as high risk borrowers, who often pay a higher interest rate over longer loan duration. A threshold for a minimum acceptable credit score may be determined by each financial lending institution. The practice of offering borrowers loans at rates that are higher than warranted by the credit history of the borrower is sometimes referred to as predatory lending. While past credit history and credit score may be a good indicator of future financial performance, an applicant having a less than acceptable credit score but desirous to improve the credit score may become a victim of predatory lending by being locked into paying the higher interest rate for the entire duration of the loan. Existing customers or members of a financial lending institution may have little or no incentive to maintain loyalty since other competing financial lending institutions are likely to offer seemingly lucrative upfront incentives to seek new customers for refinancing and/or loan transfers. 
     Accordingly, it would be desirable to provide a consumer loan having a built-in incentive structure to reward actual performance and maintain customer loyalty, absent the disadvantages found in the prior methods discussed above. 
     SUMMARY 
     Various embodiments of the present disclosure are directed to systems and methods for providing a loan having an interest rate and a loan period. The systems and methods dynamically adjust the interest rate during the loan period based on actual payment performance of a borrower, thereby resulting in an improved reward structure, greater borrower loyalty and an improved experience for the borrower. 
     In one aspect of the disclosure, the interest rate is dynamically adjusted during the loan period responsive to a change in a credit score of the borrower. The credit score may be derived internally by a financial lending institution and/or may be reported by an independent credit reporting company. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         FIG. 1A  is a block diagram illustrating an embodiment of a system. 
         FIG. 1B  is a block diagram illustrating an embodiment of a representative information handling system used in the system of  FIG. 1A . 
         FIG. 2  is a block diagram illustrating a loan transaction system, according to an embodiment. 
         FIG. 3  is a flow chart illustrating a method for providing a loan having an interest rate and a loan period, according to an embodiment. 
     
    
    
     DETAILED DESCRIPTION 
     Referring now to  FIG. 1A , in one embodiment, a system for financial lending  100  is illustrated. The system  100  includes a computer network  105  such as, for example, a Transport Control Protocol/Internet Protocol (TCP/IP) network (e.g., the Internet and/or an intranet). A financial lending institution or a provider  110  is operably coupled to the network  105 . Examples of a provider  110  may include a bank, a credit union, an insurance company, a financial investment company, a credit card issuer, a credit issuing division of a capital goods manufacturer, a broker/agent, and similar others. A plurality of users  115 ,  120 , and  125  are also operably coupled to the network  105  in order to allow communication between the users  115 ,  120 , and  125  and the provider  110 . Examples of a user may include a borrower, a member of a financial lending institution, a credit counselor, a broker/agent, a potential buyer of a new loan, a researcher, and similar others. 
     In a particular embodiment, the system  100  is operable to process financial transactions between various entities such as between the provider  110  and the user  115 . A financial transaction generally involves a change in the status of the financial resources of two or more entities, such as businesses and/or individuals. For example, the user  115  may initiate a loan transaction by completing an on-line loan application at the provider&#39;s web site. After collecting loan application information from the user  115 , the provider  115  may look up a credit score rating for the user  115  and determine whether to approve or disapprove the loan application submitted by the user  115 . On approval and signing of a loan agreement using secure digital signatures, the provider  110  may electronically transfer the loan amount to a bank account of the user  115 . The user  115  may electronically transfer funds out of a specified bank account to the provider  110  as monthly payments. 
     Each of the provider  110  and the users  115 ,  120 , and  125  includes a respective network interface for communicating with the network  105  (e.g., outputting information to, and receiving information from, the network  105 ), such as by transferring information (e.g., instructions, data, signals) between such users and the network  105 . Accordingly, through the network  105 , the provider  110  communicates with the users  115 ,  120 , and  125 , and the users  115 ,  120 , and  125  communicate with the provider  110 . 
     For clarity,  FIG. 1A  depicts only one provider  110 . However, the system  100  may include a plurality of providers. Likewise, for clarity,  FIG. 1A  depicts only three users  115 ,  120 , and  125 . However, the system  100  may include a plurality of users. In the discussion below, the user  115  is a representative one of the users  115 ,  120 , and  125 . 
     Each of the provider  110  and the users  115 ,  120 , and  125  includes a respective information handling system (IHS), a subsystem, or a part of a subsystem for executing processes and performing operations (e.g., processing or communicating information) in response thereto, as discussed further below. Each such IHS is formed by various electronic circuitry components. Moreover, as illustrated in  FIG. 1A , such IHS&#39;s may be coupled to each other. Accordingly, the provider  110  and the users  115 ,  120 , and  125  operate within the network  105 . 
     An IHS is an electronic device capable of processing, executing or otherwise handling information. Examples of an IHS include a server computer, a personal computer (e.g., a desktop computer or a portable computer such as, for example, a laptop computer), or a handheld computer. Examples of an IHS also include a router, a switch and other devices coupled to a network (e.g. the network  105 ). 
     Referring now to  FIG. 1B , an IHS  130  which is representative of one of the IHS&#39;s described above, is illustrated. The IHS  130  may include any or all of the following: (a) a processor  130   a  for executing and otherwise processing instructions, (b) a plurality of input devices  130   b , which are operably coupled to the processor  130   a , for inputting information, (c) a display device  130   c  (e.g., a conventional electronic cathode ray tub (CRT) device or a conventional liquid crystal display (LCD)), which is operably coupled to the processor  130   a , for displaying information, (d) a print device  130   d  (e.g. a conventional electronic printer or plotter), which is operably coupled to the processor  130   a , for printing visual images (e.g., textual or graphic information on paper), (e) a computer readable medium  130   e , which is operably coupled to the processor  130   a , for storing information, as discussed further below, and (f) various other electronic circuitry for performing other operations of the IHS  130  known in the art. 
     For example, the IHS  130  includes (a) a network interface (e.g., circuitry) for communicating between the processor  130   a  and the network  105  and (b) a memory device (e.g., random access memory (RAM) device or read only memory (ROM) device for storing information (e.g., instructions executed by processor  130   a  and data operated upon by processor  130   a  in response to such instructions)). Accordingly the processor  130   a  is operably coupled to the network  105 , the input devices  130   b , the display device  130   c , the print device  130   d , and the computer readable medium  130   e , as illustrated in  FIG. 1B . 
     For example, in response to signals from the processor  130   a , the display device  130   c  displays visual images. Information may be input to the processor  130   a  from the input devices  130   b , and the processor  130   a  may receive such information from the input devices  130   b . Also, in response to signals from the processor  130   a , the print device  130   d  prints visual images on paper. 
     The input devices include a variety of input devices known in the art such as, for example, a conventional electronic keyboard and a pointing device such as, for example, a conventional electronic “mouse”, rollerball, or light pen. The keyboard may be operated to input alphanumeric text information to the processor  130   a , and the processor  130   a  may receive such alphanumeric text information from the keyboard. The pointing device may be operated to input cursor-control information to the processor  130   a , and the processor  130   a  may receive such cursor control information from the pointing device. 
     In an exemplary, non-depicted embodiment, the IHS  130  includes an operating system (OS). The OS is a type of software program that controls execution of other software programs, referred to as application software programs. Each software program includes a plurality of instructions executable by the processor  130   a . In various embodiments the instructions and/or software programs may be implemented in various ways, including procedure-based techniques, component-based techniques, and/or object-oriented techniques, among others. Examples include assembler, C, XML, C++ objects, Java and Microsoft&#39;s .NET technology. 
     The computer readable medium  130   e  and the processor  130   a  are structurally and functionally interrelated with one another as described below in further detail. Each IHS of the illustrative embodiment is structurally and functionally interrelated with a respective computer readable medium, similar to the manner in which the processor  130   a  is structurally and functionally interrelated with the computer readable medium  130   e . In that regard, the computer readable medium  130   e  is a representative one of such computer readable media including, for example, but not limited to, a hard disk drive. 
     The computer readable medium  130   e  stores (e.g., encodes, records, or embodies) functional descriptive material (e.g., including but not limited to software (also referred to as computer programs or applications) or data structures). Such functional descriptive material imparts functionality when encoded on the computer readable medium  130   e . Also, such functional descriptive material is structurally and functionally interrelated to the computer readable medium  130   e.    
     With such functional descriptive material, data structures define structural and functional interrelationships between such data structures and the computer readable medium  130   e  (and other aspects of the system  100 ). Such interrelationships permit the data structures&#39; functionality to be realized. Also, within such functional descriptive material, computer programs define structural and functional interrelationships between such computer programs and the computer readable medium  130   e  (and other aspects of the system  100 ). Such interrelationships permit the computer programs&#39; functionality to be realized. 
     For example, the processor  130   a  reads (e.g., accesses or copies) such functional descriptive material from the computer readable medium  130   e  onto the memory device of the IHS  130 , and the IHS  130  (more particularly, the processor  130   a ) performs its operations (as described elsewhere herein) in response to such material which is stored in the memory device of the IHS  130 . More particularly, the processor  130   a  performs the operation of processing a computer application (that is stored, encoded, recorded, or embodied on a computer readable medium) for causing the processor  130   a  to perform additional operations (as described elsewhere herein). Accordingly, such functional descriptive material exhibits a functional interrelationship with the way in which processor  130   a  executes its processes and performs its operations. 
     Further, the computer readable medium  130   e  is an apparatus from which the computer application is accessible by the processor  130   a , and the computer application is processable by the processor  130   a  for causing the processor  130   a  to perform such additional operations. In addition to reading such functional descriptive material from the computer readable medium  130   e , the processor  130   a  is capable of reading such functional descriptive material from (or through) the network  105  which is also a computer readable medium (or apparatus). Moreover, the memory device of the IHS  130  is itself a computer readable medium (or apparatus). 
       FIG. 2  is a block diagram illustrating a loan transaction processing system  200 , according to an embodiment. In the depicted embodiment, the transaction system  200  includes a lender  210  such as a financial lending institution having financial resources to provide a loan  220  to a borrower  230 . In an exemplary, non-depicted embodiment, the system  200  may include a plurality of lenders and borrowers. In a particular embodiment, the lender  210  is substantially the same as the provider  110  and the borrower  230  is substantially the same as the user  115  described with reference to  FIG. 1A . In this embodiment, the lender  210  is coupled to the borrower  230  via the network  105 . At least a portion of the financial transactions between the lender  210  and the borrower  230  such as the loan  220  take place electronically via the network  105 . 
     In a particular embodiment, the loan  220  is at least one of an automobile loan, a personal loan, a home equity loan, a loan on a credit card, an educational loan and/or a combination thereof. The loan  220  may be set up as an explicit or an implicit agreement between the lender  210  and the borrower  230 . In a loan transaction, in response to a request for a loan by the borrower  230 , an advance of funds known as a loan amount  222  (or a principal amount) is transferred from the lender  210  to the borrower  230 . As a part of the agreement, the borrower  230  agrees to pay back the lender  210 , the loan amount  222  with interest over an agreed upon time period. An agreed upon interest rate  224  for the loan  220  and an agreed upon loan period  226  define a monthly or periodic payment amount. That is, the borrower  230  pays back the loan  220  over the loan period  226  by making a plurality of payments  240  on or before a series of predefined dates and/or time periods, where each of the plurality of payments  240  shown as payment # 1   242 , payment # 2   244  and payment #n  248  include a principal portion and an interest portion. 
     In the depicted embodiment, the lender  210  initially sets the interest rate  224  for the loan  220  in response to receiving a credit score  250  for the borrower  230 . In a particular embodiment, the borrower  230  is a high risk borrower having the credit score  250  below a predefined threshold. The lender  210  may define a particular value for the credit score  250  as a minimum threshold. To cover the higher risks associated with the high risk borrower, the lender  210  increases the interest rate  224  and/or increases the loan period  226 . In a particular embodiment, the credit score  250  is received from a third party, independent credit reporting/monitoring bureau such as Equifax, Experian and TransUnion companies. In another embodiment, the credit score  250  may be derived internally by the lender  210  based on information provided by an existing member and/or borrower. 
     In a particular embodiment, the interest rate  224  is adjustable by the lender  210  in response to the borrower&#39;s desirable financial conduct such as a payment performance of the borrower  230  measured over an adjustable time period such as 12 months. During the adjustable time period, the borrower  230  pays at least n number of the plurality of payments  240 , where n is the adjustable time period. In a particular embodiment, the adjustable time period n is adjustable from at least 6 months up to a maximum period not exceeding the loan period  226 . The lender  210  monitors payments received over the adjustable time period for on time performance. If each payment included in the plurality of payments  240  is received in a timely manner during the adjustable time period, then the lender  210  dynamically adjusts the interest rate  224  to reward the borrower&#39;s performance. In a particular embodiment, the interest rate  224  is adjustable after the expiration of the adjustable time period by reducing the interest rate  224  by a predefined amount. The reduction in the interest rate  224  may result in reducing the loan period  226  while maintaining the same payment amount. 
     In an embodiment, the lender  210  may adjust the interest rate  224  multiple times during the loan period  226  by defining multiple adjustable time periods for evaluating payment performance. For example, the lender  210  may adjust the interest rate  224  every 12 months during a 60 month loan period based on payment performance. 
     By providing an ability to lower the interest rate  224  during the loan period  226  the lender  210  provides an incentive to the borrower  230  to maintain loyalty. In a particular embodiment, the interest rate  224  is adjustable during the loan period  226  responsive to a change in the credit score  250  of the borrower  230 . That is, in addition to rewarding the borrowers desirable financial conduct as measured by the timely payment performance of the borrower  230 , the lender  210  may further reduce the interest rate  224  in response to an increase in the credit score  250  of the borrower  230 . Also, it should be appreciated that an adjustment to the loan  220  may be made on any number of borrower  230  activities, including for example timeliness on other accounts, minimum balance, or other good financial conduct. 
     In an embodiment, the adjustment to the interest rate  224  during the loan period  226  may be expressed as a predefined function of the borrower&#39;s performance as measured by parameters such as number of consecutive payments paid on a timely basis and an increase in the credit score  250  compared to the threshold and similar others. 
       FIG. 3  is a flow chart illustrating a method for providing a loan having an interest rate and a loan period, according to an embodiment. In a particular embodiment, the loan is substantially the same as the loan  220  described with reference to  FIG. 2 . In an embodiment, the method for providing the loan is implemented using the system  100  and the computer readable medium  130   e  described with reference to  FIGS. 1A and 1B . 
     In step  310 , a plurality of payments are received from a borrower during an adjustable time period of the loan period. As described earlier, in a particular embodiment, the adjustable time period is adjustable from at least 6 months up to a maximum period not exceeding the loan period. In step  320 , a determination is made whether each one of the plurality of payments is received in a timely manner, e.g., on or before a predefined due date. In step  330 , in response to determining that the plurality of payments received during the adjustable time period are received in a timely manner, the interest rate is adjusted after the expiration of the adjustable time period. 
     Various steps described above may be added, omitted, combined, altered, or performed in different orders. For example, in a particular embodiment, the step  340  may be added to further adjust the interest rate. In step  340 , the interest rate is adjusted in response to receiving a new value for the credit score of the borrower. 
     Although illustrative embodiments have been shown and described, a wide range of modification, change and substitution is contemplated in the foregoing disclosure and in some instances, some features of the embodiments may be employed without a corresponding use of other features. Those of ordinary skill in the art will appreciate that the hardware, software and methods illustrated herein may vary depending on the implementation. For example, it should be understood that while the various incentives describe a reduction in interest rate, it would be within the spirit and scope of the invention to encompass an embodiment deploying other forms of incentives such as membership reward points, e.g., points that may be redeemable to purchase merchandise or airline tickets, and/or membership fee waivers to reward payment performance during the loan period. 
     The methods and systems described herein provide for an adaptable implementation. Although certain embodiments have been described using specific examples, it will be apparent to those skilled in the art that the invention is not limited to these few examples. The benefits, advantages, solutions to problems, and any element(s) that may cause any benefit, advantage, or solution to occur or become more pronounced are not to be construed as a critical, required, or an essential feature or element of the present disclosure. 
     The above disclosed subject matter is to be considered illustrative, and not restrictive, and the appended claims are intended to cover all such modifications, enhancements, and other embodiments which fall within the true spirit and scope of the present invention. Thus, to the maximum extent allowed by law, the scope of the present invention is to be determined by the broadest permissible interpretation of the following claims and their equivalents, and shall not be restricted or limited by the foregoing detailed description.