Are E Payday Loans the Future of Alternative Lending?

Financial experts have gone on record as stating that about 20 percent of households in the United States are underbanked. This means that even though the household might have access to a traditional checking account that they also depend on alternative financial services, like E Payday Loans. An E Payday Loan is simply a signature loan that a consumer takes out via an online lending company’s website. These millions of consumers depend on E Payday Loans and title loans because most banks do not offer loans to people with lower credit scores or incomes. This is likely the case because banks do not take the right data into account when assessing unbanked consumers’ ability to repay loans.

Some Lending Companies Missing out on Millions of E Payday Loans

The general consensus has pretty much been that underbanked consumers are riskier to lend to. This perception, however, has caused problems for lender and the consumers they could potentially have been serving. The majority of underbanked consumers are trying to improve their financial big picture, and to do so they need alternative credit options, like E Payday Loans. A consumer who has proven to have the ability to repay (ATR) on cash advance loans deserve to get fast access to cash for emergency expenses, like car repairs or doctor’s visits. The banks are missing a huge opportunity to serve these millions of consumers. E Payday Loan providers, on the other hand, have the power to assist these customers with much-needed financial solutions.

E Payday Loans and Ability to Repay

All lenders have to constantly deal with how to manage lending risk when providing services and loans to underbanked and bad-credit consumers. The Consumer Financial Protection Bureau (CFPB) will most definitely not make these challenges any easier, thanks to their newest proposed regulations. The CFPB requires lenders to make “good faith, reasonable determination” with regards to consumers’ ATR. When a lender makes an E Payday Loan, for example, the lender will have to check into the borrower’s income, expenses and make a validation of the data, while still taking a 30 “cool off period” into consideration between e payday loans.

E Payday Loans and Alternative Data

It all really comes down to the data that the CFPB considers important when lenders offer their customer E Payday Loans. Alternative credit data, however, does help to provide a more realistic picture of a consumer’s ATR.

The alternative data that lenders might consider using when offering E Payday Loans can include data that has been collected from non-traditional and traditional lending companies, along with non-financial information available via public records. Information related to other alternative financial products, like E Payday Loans and title loans can be very important when determining a person’s actual ATR. More data reveals more about the person borrowing money and should be considered as more valid than the miniscule amount of information usually taken into account by mainstream lenders.

E Payday Loans are a Financial Lifeline for Millions of Consumers

With real ATR in mind for these millions of potential customers, bank marketers need to look closely at attracting the so-called credit climbers, consumers determined to improve credit scores in order to reach a certain lifestyle and access more credit options. Every time a credit climber does something positive, they deserve to improve their credit score. The problem is that the vast majority of these customers—and their credit performance—are simply unrecognized and untracked by the big three bureaus. We’ve seen people improve their credit scores at every scoring level by having alternative credit data factored in during the underwriting process.

The world has changed, and products like E Payday Loans continue to grow in popularity. By considering alternative data when making loans, online lending companies are able to better serve millions of consumers who might otherwise go without access to cash for emergency expenses.

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