Subprime consumers use credit for non -system values ​​to increase the score

Contrary to the perception of financial responsibility, a significant part of the Subprime creditors actively and strategically use loans to improve their financial position, and shows a sub -provider market segment with a strong desire for traditional financial inclusion. It is one of the findings from the latest PymnTS ​​report “High credit cards -refusal interest -subprime -Subprime loan to turn to alternative options.”

Navigation by the current consumer credit area places considerable challenges for people who were classified as subprime creditors, which are usually defined by credit scores under 620. These consumers are exposed to considerable obstacles to access to conventional credit products. Traditional banks are often poorly equipped to draw this segment. As a result, the subprime applicants encounter significantly higher rejection rates for conventional products such as credit cards. In particular, the refusal rates for subprime credit card applicants are 2.3 times higher than for Super-Prime creditors. 29% of Subprime consumers report that a credit card is refused compared to only 12% of Super Prime consumers. This limited access to conventional financial services forces many subprime creditors to apply for alternative credit options.

Subprime loanes are increasingly not to have non-traditional ways such as pay-off loans, loan-building loans and buy, now later (BNPL) services (BNPL) to cover significant purchases and bridge cash flow gaps. They apply for loans and BNPL for higher rates than other consumers. For example, 40% of Subprime creditors have applied for BNPL compared to 27% of Super Prime consumers, and it is more likely to be 2.1 times a payday or loan building loan than those with higher credit scores. While these alternative accessibility, often with lower rejection rates than conventional maps (e.g. 14% for BNPL, 8.2% for payday loans for subprime applicants), they often bear high interest rates and fees that these borrower can continue to burden. And the effectiveness of some alternative loan providers for building loans is limited because not all consumer behavior reports to the large loan offices. Despite these hurdles and the dependence on alternative products, the acquisition of traditional loans remains a crucial financial milestone for subprime loans.

The most important data points from the report underline the dynamics when playing:

• The refusal rates for conventional credit card products are 2.3-fold for subprime applicants compared to Superprime loan.
• A quarter of the subprime consumers use loans for non-important expenses with the specific intent to increase their creditworthiness.
• Subprime creditors show 3.6 -times more often to get a new credit card than those with the highest credit scores.

The results show that Subprime creditors represent an under -provider market that is actively looking for ways to improve their creditworthiness and integrate into the mainstream financial system. Apart from credit cards, this segment shows a greater interest in securing different types of loans, including personal loans, mortgages and car loans, which indicates a wide endeavor to the advantages offered by traditional finances. Your interest in debt consolidation loans is also higher than that of consumers with high loans.

This dynamic underlines a significant opportunity for financial institutions to develop more integrative and responsible strategies for this market segment. Products such as secured credit cards that reduce the risk of the lender and at the same time offer a way for credit consumption are identified as potential instruments with which Subprime creditors can achieve their goal of traditional loan ranges and financial stability. This analysis is based on knowledge from a survey of under 2,330 US consumers carried out in January of this year.