How Fintech Is Changing Who Can Qualify For Loans


FinTech — short for financial services — has a huge presence in the loan industry, taking the largest market share of unsecured personal loans. That’s according to TransUnion’s Industry Insights Report, which shows FinTech originates more than a third (38%) of all unsecured personal loans. 

But FinTech services aren’t just changing where people get cash loans. They’re also changing who can qualify for cash advances, installment loans, and lines of credit online. 

A Refresher on Creditworthiness

Creditworthiness reflects the likelihood you’ll pay back what you owe on time, so all lenders (online or otherwise) will check your creditworthiness.

Most traditional lenders will look at your credit score as the main determining factor of whether they’ll grant you funds and at what rates. If your score is too low for their liking, they may deny your application for an installment loan or line of credit.

Historically, this could lead to problems if you have bad credit. Without other options, you might borrow payday cash advances that come with high rates and short terms that require you to repay what you owe in one lump sum. 

Together, these make the trappings of a debt cycle, a phenomenon where you continually reborrow your loan because you can’t afford to pay it on time. This happened to one man in Missouri who ended up paying $50,000 in interest for a $2,500 cash advance.

FinTech Gives Alternatives to People with Bad Credit

FinTech or online lenders assess creditworthiness differently, which may give people with bad credit options other than payday cash advances, like installment loans and lines of credit. 

While online lenders still check your credit, they also supplement this information with alternative data. This data typically winds up being information about your employment history, income, and pay schedule. 

Alternative data helps online lenders determine how easily someone might pay back what they owe. As long as you can prove you make enough money to handle your repayments, you might find it easier to qualify for installment loans even with bad credit. 

Online bad credit financial products might come with high rates, but they also come with longer terms that help you offset these costs. For example, if you borrow cash online in Missouri with an installment loan, you’ll break up what you owe over multiple payments. This might be more manageable than handling high rates and paying everything back in one lump sum like a cash advance payday loan. 

An Unplugged Population Can’t Borrow as Easily

What if you don’t have access to the Internet? You might be out of luck. While some FinTech options may allow you to apply and manage your account over the phone, most recommend using their website or mobile app. 

According to the Pew Research Center, 7% of US adults (most of whom are seniors) don’t use the Internet. Meanwhile, 19 million Americans don’t have reliable access to the Internet. If these people also have bad credit, they may not be able to tap into the alternative loan options FinTech provides.

Bottom Line

Online lending is changing who can borrow. While FinTech may offer alternatives for people with bad credit, it could exclude offline borrowers who need help. While they make up a minority of the population, it does give food for thought about how the financial industry can service these people while supporting the growth of FinTech.


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