How to Use FinTech to Delete Your Bad Debt, Faster
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Did you know that the average American holds 5 financial accounts across just as many institutions? Gone are the days when people dealt with just 1 bank. While having access to multiple providers gives consumers the best chances for scoring the best rates, it simultaneously makes it more difficult to optimize their debt schedule.
When you are dealing with 5+ platforms, it can be difficult to get the timing right on payments.
There are several FinTech players on the market today that help consumers get rid of "bad debt" faster. Technology that was once reserved only for large corporations can now be leveraged by consumers to optimize their payment schedules and get ahead of debt. We'll take a look at 2 of them in this article, but first, let's define bad debt.
What is Bad Debt?
While being 100% debt-free is a goal for many Americans, the best approach is to be free of BAD debt. There is a debate on what APR (Annual Percentage Rate) constitutes as “bad debt”. Is it 5, 8, 10%
The truth is bad debt is any debt that grows at a rate that outpaces the debtor’s ability to pay.
If you have debt that you can't keep up with, your #1 priority is to get rid of it. But when you have multiple bills to pay on top of your debt, it can be tempting to make only the minimum payment due. To keep ahead of your bad debt AND maintain your ongoing expenses, you must optimize your payment schedule.
What is Payment Optimization?
Payment optimization means that you schedule your debt payments in a way that maximizes your cash flow while prioritizing the bad debt to pay down first. But you don’t have to figure out how to do this on your own. There are two companies on the market that use AI (Artificial Intelligence) to do the heavy lifting for you:
Bright: The company has built a “MoneyScience” system that studies your finances. The system researches each user’s individual spending habits and evaluates the fastest, smartest ways to meet their individual goals. Learn more about Bright.
Tally: The company touts that their users get out of debt up to 2 times faster by using their app. Users with a credit score of 580 or higher may be eligible to access Tally’s lower-interest credit line, which is then used to pay down high-interest credit cards. Learn more about Tally.
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