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Credit Is More Accessible Than Ever — but Is That a Good Thing?



Fintech is taking the banking world by storm, and there’s both good news and bad.

The days of going to your local bank branch and filling out a loan application may be numbered. Now, if you want to get a mortgage loan or a car loan, there are dozens of websites where you can type in your information and receive offers within a matter of minutes. 

Often, these lenders offer credit to folks who wouldn’t be approved by a traditional bank, and sometimes they even offer lower rates.

Image source: Getty Images

Wider access to credit means that underserved populations, such as low-income consumers, immigrants, and rural populations, have a better chance of affording a home or a car or simply covering an unexpected emergency without falling into unmanageable debt thanks to sky-high interest rates. 

However, in its most recent Credit Card Market report, the Consumer Financial Protection Bureau (CFPB) warned that this increase in access comes with its own set of risks and unintended consequences, such as the potential for discrimination.

How technology is increasing access to credit

This increase in access is largely thanks to the fintech industry, which has leveraged increasingly sophisticated technology in fields like machine learning and data analysis to make the lending process more efficient.

A proportion of applicants who are rejected for having no credit or bad credit would actually have repaid their loans on time. Unfortunately, their credit score alone didn’t reflect this ability and willingness to repay. 

Online lenders and start-up credit card companies use additional data and new algorithms to identify those no-credit and low-credit consumers who are likely to repay their loans. They then lend to them, often at far more reasonable rates than they’d get elsewhere. 

By using alternative data such as payment history from utilities, phone, or online services, insurance claims, and more, these fintech companies can paint a more holistic picture of how risky each loan would be.

Previously, the only remaining option for many of these consumers was to borrow from payday lenders and the like, which approve nearly anyone, but only because they charge astronomically high interest rates. Now, some low-credit consumers may instead be approved by online lenders at reasonable rates.

How online lenders and credit card start-ups impact consumers

A fintech lending study, published by the Federal Reserve Banks of Philadelphia and Chicago, shows that online lenders place some subprime borrowers in much higher rating categories. 

For example, in 2015, more than 25% of borrowers who received a B-grade from a major online lender had subprime credit scores. The lender used a scale from A to G, with A being the highest. What’s more, the study found that given the same risk level, borrowers would likely get a lower rate with the online lender.

If you’re wondering whether these online lenders are lending to people who can’t afford to borrow, the answer appears to be no. The study found a high correlation between the online lender’s borrower rating system and loan performance, and the rating grades do a good job of predicting who will become delinquent on their loan within one year.

As for credit cards, fintech is just barely starting to enter the market, so the data is still unclear. A number of start-ups now offer cards that use alternative data to approve consumers with no credit at reasonable rates, sometimes with no fees attached. 

One hot new credit card marketed toward millennials and Gen Zers with no credit even offers cash-back rewards. This came under fire from critics who argued that it is irresponsible to offer rewards on a credit card designed to help young folks build credit. After all, cash-back rewards can encourage cardholders to overspend, and new cardholders may be tempted to rack up a balance, landing them in debt and damaging their credit from the get-go. There’s another new rewards credit card geared toward students that requires no credit history, doesn’t charge a security deposit, and allows international students with no Social Security number to provide alternative documents to verify their identity.

Credit cards get into more dangerous territory than loans because they tend to come with high interest rates, and make it extremely easy to mindlessly swipe away and accidentally land yourself in thousands of dollars of high-interest debt. What’s more, loans are often used to make necessary purchases like a car, or investments like a house, whereas credit cards tend to be used for non-essentials like shoes and video games. 

On the other hand, many of these credit cards give underserved populations the chance to build credit in what is arguably the easiest and cheapest way possible — using a credit card regularly and paying it off each month.

The discrimination inherent in fintech algorithms

As it turns out, machines, like humans, can be biased. After all, biased humans create them. Fintech lenders that use artificial intelligence to develop their algorithms aren’t immune.

A 2018 study done by the University of California, Berkeley found that fintech lenders charge Latinx and African-American borrowers interest rates that are six to nine basis points higher. In the end, these groups pay between $250 million and $500 million more per year in mortgage interest.

However, face-to-face lenders also charge these borrowers higher rates. In fact, face-to-face and fintech lenders both tend to implement this bias equally, proving that the algorithms mirror the biases held by the people who create them. 

One example of how this plays out is that fintech lenders might use additional information such as geographic locations to determine mortgage rates for potential borrowers. This can be a basis for racial bias in cities that tend to be segregated by race. However, physical banks can implement this same process by providing different rate sheets for different branch locations.

There is a bright side to fintech lending when it comes to discrimination. The study found that while physical banks tend to reject minority applicants at a higher rate than white applicants with the same credentials, fintech lenders don’t discriminate when it comes to whether or not applicants are approved or rejected. This might be due to the increased competition online lending has introduced and the ease with which borrowers can now shop around for the best loans.

Increased access to credit comes with its own set of dangers and pitfalls, and it’s important that we stay vigilant as fintech continues to encroach on traditional banking. However, new banking technologies also have the potential to provide affordable credit to underserved populations and push for greater equality.

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How Do I Sell My Vehicle With Joint Ownership?



A joint auto loan is when two borrowers have rights and responsibility to the same vehicle and loan. If you have a cosigner, then you, the primary borrower, have all the rights to the vehicle. Here’s what you need to know when you need to sell your car with two people responsible for the loan.

Selling a Joint-Owned Vehicle

Joint owners are typically spouses or life partners who combine their income to meet income requirements or get a larger loan amount. Both co-borrowers are responsible for paying the car loan and have 50/50 rights to the vehicle, so both their names are listed on the title.

Since your co-borrower has the same rights and obligations to the vehicle as you, you must get their permission to sell the car. In most cases, they also need to be present for the sale to sign the title. This may not always be the case, though, so it’s important to know how to read your car’s title.

If you have it, take a look at your vehicle’s title for the names listed on the back where you sign to transfer ownership. For example: let’s say your name is Jane and your co-borrower’s name is Joe. You’re likely to see either:

  • “Jane and Joe”
  • “Jane or Joe”
  • “Jane and/or Joe”

If you see “and/or” or the connector “or”, this typically means only one person needs to be present for the sale of the car. But if you see “and” this means both of you need to be present to transfer ownership – this is usually the case with joint ownership.

In all three cases, you still need the permission of the co-borrower to sell the vehicle even if they don’t have to be physically present to sign the title. If you sell it without the co-borrowers consent, it may be considered a crime because it’s their property, too. Moving forward, discuss the sale with your co-borrower to avoid potential legal trouble.

Selling a Car With a Cosigner

How Do I Sell My Car With Joint Ownership?If you have a cosigner on your car loan, then things become easier. A cosigner doesn’t have any rights to the vehicle and their name isn’t on the title. Their purpose is to help you get approved for the auto loan with their credit score, and by promising the lender to repay the loan if you’re unable to. A cosigner can’t take your vehicle, sell it, or stop you from selling it yourself.

However, it’s nice to let them know if you do decide to sell the car because the auto loan is listed on their credit reports. If you can, reach out to them about your plans to sell the vehicle. The car loan’s status impacts them and could affect their ability to take on new credit when it’s active.

If you sell the vehicle and the lien is successfully removed from the title, then you’re both in the clear.

Removing the Lien From a Vehicle’s Title

If you still have a loan on your car, then your number one priority is paying off your lender. Your lender is the lienholder, and you can’t sell a vehicle without removing them from the title – they own the car until you complete the loan. This typically means paying off the loan balance until naturally during the loan term, or getting enough cash to pay it all off at once from a sale.

When you’re selling a car with a loan, you want to get an offer for your vehicle that’s large enough to cover your loan balance and to remove the lien. If you don’t get a large enough offer, then you need to pay that difference out of pocket before you can sell the vehicle. Or, you may be able to roll over the remaining loan balance onto your next car loan if you’re trading it in for something else.

Looking to Upgrade Your Ride?

Many borrowers ask for help to get the car they need. If you need more income on your loan application to meet requirements, asking a spouse or life partner to chip in can do the trick. If you have a lower credit score, then a cosigner with good credit could help you meet credit score requirements.

But what if you want to go it alone on your next auto loan and your credit isn’t great? A subprime lender could be the answer. Here at Auto Credit Express, we’ve been connecting credit-challenged consumers to dealerships with bad credit resources for over two decades, and we want to help you too.

Fill out our free auto loan request form and we’ll look for a dealer in your local area that’s signed up with subprime lenders. These lenders assist borrowers with many unique credit circumstances to help them get the vehicle they need. Get started today!

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Fixed-rate student loan refinancing rates sink to new record low for the second straight week



Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

The latest trends in interest rates for student loan refinancing from the Credible marketplace, updated weekly. (iStock)

Rates for well-qualified borrowers using the Credible marketplace to refinance student loans into 10-year fixed-rate loans hit another new record low during the week of May 3, 2021.

For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender, during the week of May 3:

  • Rates on 10-year fixed-rate loans averaged 3.60%, down from 3.69% the week before and 4.32% a year ago. This marks another record low for 10-year fixed rate loans, besting the previous record of 3.69%, set last week.
  • Rates on 5-year variable-rate loans averaged 3.19%, down from 3.23% the week before and up from 3.04% a year ago. Variable-rate loans recorded a record low of 2.63% during the week of June 29, 2020.

Student loan refinancing weekly rate trends

If you’re curious about what kind of student loan refinance rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates won’t affect your credit score.

Current student loan refinancing rates by FICO score

To provide relief from the economic impacts of the COVID-19 pandemic, interest and payments on federal student loans have been suspended through at least Sept. 30, 2021. As long as that relief is in place, there’s little incentive to refinance federal student loans. But many borrowers with private student loans are taking advantage of the low interest rate environment to refinance their education debt at lower rates.

If you qualify to refinance your student loans, the interest rate you may be offered can depend on factors like your FICO score, the type of loan you’re seeking (fixed or variable rate), and the loan repayment term. 

The chart above shows that good credit can help you get a lower rate, and that rates tend to be higher on loans with fixed interest rates and longer repayment terms. Because each lender has its own method of evaluating borrowers, it’s a good idea to request rates from multiple lenders so you can compare your options. A student loan refinancing calculator can help you estimate how much you might save. 

If you want to refinance with bad credit, you may need to apply with a cosigner. Or, you can work on improving your credit before applying. Many lenders will allow children to refinance parent PLUS loans in their own name after graduation.

You can use Credible to compare rates from multiple private lenders at once without affecting your credit score.

How rates for student loan refinancing are determined

The rates private lenders charge to refinance student loans depend in part on the economy and interest rate environment, but also the loan term, the type of loan (fixed- or variable-rate), the borrower’s credit worthiness, and the lender’s operating costs and profit margin. 

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options ― without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 4,300 positive Trustpilot reviews and a TrustScore of 4.7/5.

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Provident Financial calls time on doorstep lending business



Provident Financial has confirmed plans to shut its 141-year-old doorstep lending arm, as its full-year results highlighted the strain the coronavirus pandemic and growing customer complaints have put on subprime lenders.

The Bradford-based company reported a pre-tax loss of £113.5m for 2020, compared with a £119m profit the previous year. The biggest drag was a £75m loss in its consumer credit division, which includes home credit.

Malcolm Le May, Provident chief executive, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market.”

Jason Wassell, chief executive of the Consumer Credit Trade Association, which represents alternative and high-cost lenders, said the decision showed that “the current regulatory framework does not work for the market, or its customers”.

“The result in this case is that access to credit will be reduced for hundreds of thousands of people.”

Provident built its name as a provider of home credit, or doorstep lending, which involves a team of local agents who regularly visit borrowers to collect repayments and discuss their products.

Proponents believed agents’ local expertise and personal relationships with borrowers allowed them to achieve better results than traditional bank lending to people with bad credit scores, but the approach has increasingly been superseded by digital models in recent years.

Provident’s business has also been affected by a series of self-inflicted and external difficulties. Its consumer credit division has been lossmaking since a botched effort to modernise the unit in 2017, which led to a pair of profit warnings and an emergency rights issue. More recently, its recovery has been hampered by an increase in customer complaints that prompted an investigation by the Financial Conduct Authority.

The complaints rise has been driven by professional claims management companies, echoing a broader trend across the subprime lending industry which has also affected companies such as Amigo, the guarantor lender. Executives also accuse the Financial Ombudsman Service, which adjudicates on customer complaints, of overstepping its mandate and encouraging huge volumes of complaints.

Provident said it would wind down or sell the consumer credit division, with either option expected to cost it about £100m. 

The move will see Provident exit the most controversial areas of high-cost credit to focus on what it describes as “mid-cost” lending through its Vanquis credit card business and Moneybarn vehicle finance arm. Vanquis and Moneybarn both remained profitable during 2020, despite more than a quarter of Moneybarn customers requesting payment holidays at the height of the pandemic.

The results were slightly better than average analyst forecasts, and the company said Vanquis and Moneybarn had both reported “improving trends” during the first quarter of 2021. Shares in Provident nonetheless dropped more than 10 per cent in early trading.

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