How FinTech Improves Your Chances of Getting a Loan Online

By David Thompson

Mar 15, 2022 11:29 AM EDT

How FinTech Improves Your Chances of Getting a Loan Online(Oleg Magni from Pexels) (Credit: Getty Image)

Almost everyone needs to borrow money at some point in their lives-whether it's to go to school, buy a home, or cover an unexpected repair. But some people have a harder time qualifying for personal loans because they don't meet a lender's credit score requirements.

Innovative FinTech services assess your eligibility for personal loans according to other standards. With an additional set of requirements, some online direct lenders are redefining what you need to qualify for personal loans and lines of credit. 

Why Does Your Credit Score Matter?

Your credit score reflects your borrowing behavior over the past seven to ten years. It's a three-digit number ranging from 300 to 850 that quickly lets a financial institution know how you've handled cash loans, credit cards, and lines of credit in the past. 

Generally speaking, credit scores are split into two categories: prime and subprime credit. 

  • Prime credit is only possible if you pay your debts on time and use your revolving line of credit sparingly. It lets financial institutions know you've been responsible with personal loans, so there's a good chance you'll continue to be responsible. 

  • Subprime credit indicates you've struggled with your debts in the past. Maybe you've missed due dates or maxed out credit cards without paying them off. This raises a red flag about your future ability to make timely payments. 

Some financial institutions may deny your application if your score is low enough. That's because they believe you could repeat your past mistakes if they grant you funds, and they don't want to risk a late or delinquent account. 

Bad Credit Cash Advances Fill a Gap

Ideally, you can put your borrowing on hold until you have a better credit score. But you can't always postpone borrowing until it's the right time. 

You may need money to cover an urgent auto repair in an emergency no matter what's happening with your finances. If you don't have savings and your credit is low, the circumstances might push you into borrowing a payday cash advance with unfavorable turns. 

After all, you can always find payday loans online with no credit check and instant approval that are easy to qualify for. 

But skipping a credit check comes with high fees and a tight timeline. You'll have to repay what you owe in one lump sum. This schedule can be hard to handle, especially if you live paycheck to paycheck. 

FinTech Offers an Alternative Choice for People with Bad Credit

FinTech services like online direct lenders treat credit differently. While they still check a borrower's score, they may also compare your score to the following data:

  • Pay schedule

  • Employment history

  • Income 

  • Utility bills

  • Rent

  • Debt-to-income ratio

This information provides insight into your current abilities to repay a loan, unlike your past habits that your credit score shows. If your data shows you can reasonably handle your repayments, you may find it easier to qualify.

There's a chance that you'll still pay high rates, as this is the cost of borrowing with bad credit. However, online direct lenders offer installment loans for bad credit. These online loans come with longer terms to offset these higher rates. 

Instead of having to repay everything in one lump sum, you'll break up what you owe into smaller chunks and pay them over multiple weeks or months. 

The Takeaway:

Traditionally, you would borrow a personal loan with good credit and a payday loan with bad. But FinTech is bridging the gap between the two. With installment loans for bad credit, online direct lenders are changing how easily you might qualify for a loan in an emergency.

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