Applying for a loan with a Fintech lender is quite different from getting a loan from a private bank. Most people who wish to apply for personal loans usually approach a private bank for funds. Fintechs are, however, becoming increasingly popular in recent times and have gone on to even overtake private banks in becoming the preferred choice for many people who want an instant online loan. This is because private banks don’t offer instant loans – they only offer traditional personal loans that have a turnaround time of at least 7 business days. So if your need is urgent or immediate of sorts, opting for a private bank to get your personal loan isn’t quite the best idea.
Coming back to Fintechs, there are several aspects that influence your loan application. Among these, the primary parameter that lenders take into account is your credit score. Apart from your credit score – which has the highest weightage in most cases – your repayment history also influences potential approval or rejection. Let’s take a look at how your approval chances with Fintechs are influenced by your credit score.
Fintech lenders have a credit score threshold
Fintech lenders are often known to have lenient eligibility criteria, but they do have a minimum credit score criterion that applicants have to meet. Most private banks that are popular in the lending space often require individuals to have a minimum credit score of 750. In the case of Fintechs, take for example Qbera – a popular Fintech lender in the market – the minimum credit score requirement is 600 in order to be eligible for an instant online loan. This is relatively way lesser than the credit score requirements that private banks demand.
Your repayment history is crucial
Again, just because Fintech lenders have easy or lenient eligibility criteria, this doesn’t mean that you can get approved with a poor repayment history. Instant online loans are unsecured loans that do not require applicants to pledge legal assets. Owing to this, besides the credit score, an individual’s repayment history is almost equally important, lest we forget that the repayment history has the largest bearing on the credit score. Your repayment history reflects instances of defaults or late payments in the past, and multiple instances of late payments and even a single instance of default can jeopardize your chances of getting your loan application approved.
A good credit score will help you get the best interest rate
Lenders use risk-based pricing to determine the cost of borrowing. This means that individuals will be offered different rates of interest depending on their credit score and repayment history. Although Fintech lenders are often known to offer slightly higher rates of interest, a good credit score will definitely result in you getting a low interest rate on your loan. As such, you can negotiate with the lender to offer you the best rate if your credit health is sound.