Lenders Giving Borrowers Second Chance Loans

Written by Christina Miller

Socioeconomic factors can play roles on credit scores, but various financial institutions have taken it upon themselves to give borrowers a second chance. People may fall into a category of never having a line of credit, poor credit from hardships of paying off debt, or more recently, losing income due to the pandemic. Regardless, financial institutions have a responsibility to serve their communities - that includes low-income and low-wealth individuals and communities.

During the fall of last year amidst the pandemic, a survey from Bankrate showed that 21% of US applicants had their credit rejected due to a low credit score (1). The same survey found that millennials were hit the hardest by the current credit climate with a 32% rejection rate when applying for credit in 2020 (1). While some of these rejected applications may be a sign of the hardships of COVID, the applicants need financial assistance and a chance to boost their credit scores for future applications. 

By providing borrowers with a second chance, lenders can transform someone’s life as they open the doors to opportunities. Not only can borrowers build their credit and improve their scores, but they can also keep their cars, homes and pay bills to name a few things. There are various instances in life where people need a second chance, and financially they deserve a glimmer of hope too.

Community Development Financial Institutions (CDFI) has emerged as one of the mainstream leaders in a vast range of needs across various economic communities. While CDFI funds many credit unions, banks, loan funds and venture capital funds, together they all share a common vision to expand economic opportunity and improve the quality of life for low-income individuals. The latest reports from 2019 showed that CDFI Programs awarded finances to more than 19,000 businesses, 51,300 affordable housing spaces and originated more than $21.5 million in loans and investments (2). These funds empowered communities to thrive as they could reach sustainable organizational goals and drive the community. 

Here are five ways Credit.com describes how CDFIs help borrowers beyond personal, auto, housing and small business loans. 

1.Flexible loan rates

Small loans are not usually alluring to financial institutions, they are likely to recommend a credit card for lower amounts. Through CDFI, financial institutions do not worry about the loan amount making them a profit, thus they are more flexible with providing the loan amount borrowers request. 

2.Better loan terms

Like credit unions, CDFIs usually offer better rates and terms than traditional lenders would. With more flexible options, CDFIs have the ability to work with low credit scores and borrowers looking to improve their credit.

3.Credit leniency

Poor credit should not stop a borrower from exploring options - there are opportunities for loans to be awarded for borrowers looking to boost their creditworthiness. Lenders part of the CDFIs are here to provide the financial tools needed. 

4.Support beyond the loan

Additionally to receiving a loan, financial institutions have tools and aids to help borrowers better educate and prepare themselves for further financial needs. Support beyond the loan also begins by making sure borrowers understand the terms and conditions of their loans, and how they can successfully pay off their loan and improve their credit score. 

5.Willingness to take risks

All in all, CDFIs take risks to serve low-income borrowers and communities. Borrowers need to remember that and work with the financial institution knowing that the loaned amount will be repaid and on time. 


Written by Carly Simon-Gersuk


1. https://www.bankrate.com/finance/credit-cards/credit-denial-survey/
2. https://www.cdfifund.gov/programs-training/programs/cdfi-program
3. https://www.credit.com/blog/loans-that-give-borrowers-a-second-chance-66876/?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter-20201224