Hopefully quite a straightforward question. I applied for and received a Monzo loan approx 10 days ago. Due to a change in circumstances, the loan is no longer required.
I approached Monzo to cancel the loan under the 14 day cooling off period, I received a response saying just to pay it off early. I asked if there was any practical difference and didn’t get a straight answer back.
So the question is - is there any difference between cancelling under a 14 day cooling off period and repaying the loan, or by just paying it back early?
The repayment amount would be the same, but in my head there could be a different impact on credit report - e.g. if loan is unreported yet and is cancelled, maybe it will never be reported - vs if it is repaid early then it would still show as a completed loan. Any advice or thoughts welcome
There’s some important nuance in credit reporting. Your credit file is a statement of fact but how those facts are interpreted is entirely up to the lender. A lender may, for some reason, determine that short-lived credit is a negative signal or they may determine that short-lived credit is a positive signal or they may disregard any credit that is outstanding for less than a predetermined duration… it’s lender specific, not absolute.
The most important question to ask yourself is how risk-averse you are when it comes to the way your creditworthiness is interpreted. If, for example, you’re currently going through a mortgage application then any change to your creditworthiness can be problematic and should be avoided at all costs, whereas someone with no intention of ever purchasing property would face no risk by having short-lived credit on their credit file (granted, just applying for a loan while mid-mortgage application would be insane so I assume you haven’t done this).
The most important question to ask Monzo is whether or not they report to the credit reference agencies when a loan has been open for less than 1 month, it’s very possible that “just pay the loan off” is good advice (to keep it off your credit report) because Monzo won’t ever report that loan (I don’t actually know if this is true, but a possibility). If they don’t report then this is a none issue, if they do report then you can weigh up the cost/benefit of having it on your credit file.
Personally, I wouldn’t worry about it, people are a lot more concerned about their credit report than they need to be: I wouldn’t give it a second thought unless I was in the middle of a mortgage application. Lenders mostly only care about how much credit is outstanding + your reliability in your history of repayments (missed payments are very bad) + any adverse actions (like CCJs which are very bad). A short-lived loan isn’t going to move the needle in either direction.
They will report it, as it is factual information.
Hard search - loan applied for
Credit account opened - balance of loan
Account closed/settled - balance repaid
It’ll be no different to ordering a sim only deal and cancelling within 14 days, this still shows.
As it’s a statement of fact, they have an obligation to report this.
Edit: I wouldn’t expect all of this to be reported in the same month either so probably looking 30-60 days full circle based on balance paid, Monzos reporting date, and then your credit file acting on the information depending when their update date is too. It’s complex
Under Monzo’s terms if you cancel in 14 days it is clear how you repay Monzo:
You must pay us in app by navigating to your loan in the app and making a payment or by making a payment in any other way we may tell you.
The only thing you get from customer service is:
You can withdraw by chatting to us in your app and we’ll tell you how much you’ll owe.
Here are Monzo Loans terms about withdrawing in full.
You have the right to withdraw
You have the right to withdraw from this credit agreement within 14 days starting on the day after this agreement is made. You don’t have to give a reason. You can withdraw by chatting to us in your app and we’ll tell you how much you’ll owe.
You’ll need to repay what you’ve borrowed, as soon as possible, within 30 days from the day after you tell us you withdraw from this agreement, plus interest which will be £1.63 for each day until you pay us back. You must pay us in app by navigating to your loan in the app and making a payment or by making a payment in any other way we may tell you.
If the loan is to repay any other borrowing from us, withdrawing from this agreement will not reinstate your existing agreements. Your existing agreements will end on the start date of this agreement.