Why FinTech is Important to the Credit Underserved
Being underserved can make it challenging to find a loan in an emergency, but you may find the financing you need thanks to a growing ecosystem of FinTech alternatives.
Do you have a knack for solving problems? Then put down the Sudoku and give this one a try:
Let’s say you have a flat tire, but you spent all your emergency savings last month when you had to take your kid to the walk-in clinic. With no extra cash to spare, how would you get your car road worthy again?
Most people would ask their bank for a loan or line of credit to help them take on unexpected expenses. But you may not have that option if you’re underserved.
As an underserved consumer, you don’t have access to the same financing as the average person. But that doesn’t mean you’re out of luck. Here’s how FinTech will help the underserved get credit in an emergency.
Who Are the underserved?
The underserved are a unique group of consumers. They may have a basic checking or savings account with their bank. But they look elsewhere for help when they need loans or personal lines of credit.
Why Don’t They Borrow from the Bank?
When most people need cash fast, they walk into their local branch and ask for help. But the underserved don’t, and it’s usually for reasons outside of their control.
It’s too complicated and slow
For one thing, a traditional bank line of credit is rarely fast. The country’s biggest banks still rely on outdated applications slowed down by red tape. It can take a long time to get a personal line of credit this way.
In an emergency, speed matters. You need to be able to get cash quickly, so you can avoid late fees and other charges.
You need a good credit score for a bank line of credit
There’s also no guarantee you will get a personal line of credit through a bank. Most underserved consumers have bad credit, which is a major barrier to getting cash.
The average mainstream bank has strict lending policies that make it harder to get a bank line of credit with bad credit.
How Does FinTech Help the Underserved?
FinTech is short for financial technology. It represents a new group of companies making it easier to do daily banking tasks online — from ordering checks to transferring funds.
FinTech can simplify anyone’s banking experience. But it promises to have the biggest impact on the underserved, as some companies are changing the way you can borrow money online.
Where traditional banks have complicated application processes that take forever to complete, online alternatives have cut through the red tape. They have fewer restrictions limiting who can borrow, making it easier and faster to get a personal line of credit — even if you have bad credit.
Does FinTech Impact Your Credit Score?
One of the biggest misconceptions about getting an online loan is that it won’t count towards your credit.
This isn’t true.
If your lender reports your payment history to one of the major credit bureaus, your personal line of credit will count. You’ll have an opportunity to build credit if you use your online personal line of credit responsibly.
What is a Personal Line of Credit for People with Bad Credit?
In many ways, a personal line of credit for people with bad credit is just like a bank line of credit.
- You’re approved a credit limit
- You may withdraw as much or as little against this limit as you wish
- Once you pay off your balance, you can your full credit limit again
More importantly, it acts as a safety net for when unexpected expenses come your way — like a flat tire after you’ve emptied out your emergency fund.
It’s not always easy keeping your cool in the face of a financial emergency when you’re underserved. But it’s doable. FinTech is a possible alternative that helps you tap into credit.
Better yet, if you pay off your online personal line of credit every billing cycle, you’ll start laying down a positive payment history. This can help you build up your credit until you can tap into a greater selection of financial options.
Read Full Article Here – Why FinTech is Important to the Credit Underserved