How AI is being used to help consumers cut their debt

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AI can help you decide which card to pay first, qualify you for a loan

Kelly Dilworth

Personal finance writer
Specializing in new trends in credit

Startups are using artificial intelligence to help consumers cut debt

If you’re struggling with a large credit card balance or a monthly student loan payment, your options aren’t limited to balance transfer cards and traditional loan refinancing deals. 

A growing number of high-tech tools are popping up to help you lower your interest payments and shed your debt more quickly.

Fintech startups are using artificial intelligence (AI) and machine learning – a red-hot data analysis technique that allows computers to independently scrutinize data and make predictions – to analyze users’ personal histories and offer lower rate loans than consumers may otherwise be able to get.   

Can’t decide which card to pay first? Tally aims to help 

The get-out-of-debt app Tally, for example, helps people slice their debt payments by offering a lower rate line of credit and paying cardholders’ bills for them. It also helps cardholders save money on interest (and thus pay down their debt faster) by using AI to determine which cards consumers should prioritize first when allocating payments. 

Research has shown that consumers who try to prioritize their card payments themselves tend to lose money by making irrational decisions about which card deserves a bigger payment. But allowing an AI-powered app on your phone to make those decisions for you could help you save your money more effortlessly.

“When you combine powerful algorithms with the ability to do work on behalf of the customer, you can really help millions of people,” Tally CEO Jason Brown said in an earlier news release. “Whether credit card users carry balances or not, research has shown that they find managing their cards as stressful as awaiting major medical test results, and that’s not what credit cards should represent.”

Until recently, Tally was only available through iTunes. However, it recently announced the app would soon be available on Android, making it more widely available to users.  

See related: How artificial intelligence is changing card rewards, saving, spending and travel 

Upstart goes beyond traditional credit report data 

The alternative lender Upstart also helps borrowers shrink their debt payments by consolidating their debt onto a lower rate loan. But rather than use traditional underwriting tools, Upstart relies on machine-learning powered algorithms to help identify creditworthy borrowers and set cardholders’ interest rates. It also uses a lot more data than what you’ll find on a traditional credit report.

In a recent interview with LendEdu, for example, Upstart CEO Dave Girouard noted, “the amount of data in our credit decision is dramatically larger than what other lenders typically use.” For example, “we look at things like education, employment history, how they interact with our application, etc.” 

The upshot for borrowers: You may have an easier time getting approved. When a lender incorporates more information into their credit decisions, some people wind up looking more creditworthy than they did before.   

A pioneer in using artificial intelligence for its credit decisions, Upstart has now started selling its AI-powered technology to banks, credit unions and other nontraditional lenders. As a result, borrowers with less-than-perfect credit scores could soon find that they have significantly more options for consolidating their debt or obtaining lower rates.

See related: Artificial intelligence shines new light on ‘credit invisibles’ 

Personetics offers saving advice based on your spending habits 

Other fintech companies are also using AI and machine learning to help power new financial products.

The digital banking company Personetics, for example, has created an AI-powered tool for banks to offer to their customers to help them manage their money more effectively. 

Similar to the Tally app, the “self-adjusting” tool analyzes people’s spending habits and makes personalized suggestions for users who are trying to meet a long-term goal, such as saving for college or paying off a credit card. It also makes payments or independently transfers cardholders’ money in order to help them save money on charges.

Compare with traditional options before you go high tech 

As more banks and other financial companies embrace artificial intelligence and machine learning, it’s likely consumers will see even more high tech tools on the horizon.

That, in turn, could make it easier for you to pay down debt or obtain an affordable loan. The more choices you have for controlling your balances, the more likely you are to find the right tool for you. 

Just be sure to carefully read a product’s terms and compare it with traditional lending options before you sign up. Depending on your credit score, you may find an old-fashioned interest-free balance transfer card with a lengthy promotional period is still a better option for consolidating your debt than a fancier, high tech option. 

See related: New tools help take the guesswork out of improving your credit score 




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