As we celebrate the last decade of fintech, one thing that has stood out is the impact digital lending has had on consumer lending habits - and their options. With more financing options available than ever before, the market is fraught with lending options to suit each need, credit score and repayment condition. Online instalment loans have exploded onto the scene, giving credit card usage a run for its money, while peer to peer lending platforms are now the norm.

In the industry, experts are already looking ahead to 2020 and beyond, predicting the prioritisation of financial health and the vertical integration of fintech across other key industries such as healthcare.

Here are some of the decisions consumers need to keep in mind when considering the multiple fintech credit options available today.

Explore Their Choices

By the end of the first quarter in 2019, 19.3 million Americans had at least one personal unsecured loan outstanding, mainly thanks to the rise of fintech. Wider access to finance options has meant that more of them are turning to personal loans as they continue to live paycheck to paycheck. However, as with most personal unsecured loans, they come with a higher price tag. For unsecured personal loans, the interest rates can range from 5 percent to as high as 36 percent, much higher than the average 19 percent credit card interest rate charged for new credit card accounts. This makes it even more important that consumers do their due diligence when searching for the best loans online.

In 2019, Bankrate put the average interest rate for personal loans at 11 %, and with the influx of online instalment loan lenders, there are even more options with lower rate options. For years, consumers looking for additional finance have thought that high-interest credit cards were their only choice. Now, with the aid of online comparison platforms, consumers can easily find an interest rate they are comfortable with, and more importantly, there is more transparency when it comes to the cost of choosing that particular route.

In 2019, Bankrate put the average interest rate for personal loans at 11 %, and with the influx of online instalment loan lenders, there are even more options with lower rate options.

Check Repayment Terms And Conditions - Including Early Settlement Charges

Yet, this does not mean that borrowers are any more knowledgeable when it comes to the terms and conditions of the loans they are borrowing. In fact, in the United Kingdom, 60 percent of them do not know the rate of their loans, according to research from Mintel, while in the United States of America, Americans are similarly ill-informed. The same can be said for their financial health. In 2019, 43 percent of them didn’t know their FICO scores, a key determinant of their creditworthiness for a personal loan.

However, checking credit scores is now simpler than ever, thanks to credit bureaus and lenders like American Express offering online or mobile login and checking features. Most major credit card issuers offer a view at consumer credit scores from at least one of the three main credit bureaus. Similarly, checking the fine print of personal loans such as passed on charges or early settlement charges that may drive up the total cost of the loan are important. For example, three out of four student loan borrowers (including private loans) do not know what effect their death would have on their loans.


Assess the Impact on Their Credit Score

Fintech lending options are not only lowering the costs of borrowing, but they are also minimising the reliance on credit scoring as a main determinant of loans. This means borrowers with no past credit scores or a low score can easily get a personal loan, whether it is backed by traditional lenders like the bank or more modern peer to peer lending platforms. This does not necessarily signify that the standards of credit scores have completely been erased. Today’s fintech borrower has a FICO score of 650, compared to the 649 FICO held by traditional bank borrowers. However, a lender with a good credit score may also want to consider the additional credit options open to them, such as approval for credit card offers with 0 percent purchases and balance transfers, lowering the overall cost of borrowing.

Finally, it is interesting to note that the age market that currently holds the largest share of the fintech personal loan market is Gen X (ages 38-52) and Gen Y (ages 24-37). This captures the most tech-savvy and outspoken demographics of the market, matching up perfectly against the transparency and personalisation that fintech loans now offer.

However, even with these added benefits of fintech borrowing, there still remains a basic question that consumers must answer before they enter the world of borrowing: what is the best personal loan option for me?