Hi
I have a loan withneith Monzo and several different savings pots. Some of those pots earn me a tiny account of interest.
In would love the option of a pot that offsets the interest that I pay on my loan.
For example, if I have a 10k loan and 5k in my savings pot then while I have that money in the pot I will only pay interest on 5k of the loan.
This isnāt likely to happen because this is one of Monzoās few ways can generate profit.
Pots also donāt offset your balance.
If youāve got savings though itās almost always more beneficial to repay debt first instead of saving it.
Havenāt loans only just come to Monzo?
Either way Monzo will be keen to get people to switch to their loans as opposed to loans from other banks and this is a great feature to make people do that.
In reality itās unlikely to cost Monzo very much because as you say people are more likely to just pay the money into the loan instead.
Thatās not always possible though. For some people with variable income savings are essential and canāt just be paid into a loan as that money may be needed in a few months time.
Also the savings pots that have interest are with 3rd parties and wouldnt be generating any cash for Monzo
So youāre asking Monzo to loan to people who might not be able to pay the loan back in a few months time, and then make less money on those loans because the borrower can offset some of the interest?
Is that the idea? Sounds like a brilliant way to lose money.
Eh???
Is that your impression of how offset mortgages work?
They do generate cash for Monzo. They take a cut of the interest before it gets passed onto you. Thatās why if you save with the third party provider directly you get a higher rate.
Monzo make money off of it and the trade off is you get to view it all in one app instead of having to deal with another provider.
It might be early in the morning but the number one rule if you have additional money is to pay off loans/creditcard etc before trying to making money from interest otherwise the cost of borrowing far outweighs the interest gained.
So if you are making 20p in interest and losing Ā£10 in loan, you are wanting Monzo to make the loan cost for that month Ā£9.80 ? No better off?
Or take the money thats earning the 20p and pay off some of the loan and reduce the Ā£10 down below the Ā£9.80.
So re-reading this, why on earth would any lender let you say
well youāve lent me Ā£10k thanks 
lets pretend Iāve given you back Ā£5k (but Iāll hold on to it) 
so only charge me interest on Ā£5k thanks 
wtf? No why would we do that.
You can always pay back the Ā£5k now, then sure weāll only charge the interest on the remaining amount.
But no we arenāt going to pretend youāve given us it back.
Have any if you heard of offset mortgages?
This isnāt some crazy new idea I am suggesting.
Wow, first time posting anything in this community. It reminds me of the bad old days of flame wars on 90s forums. Not sure Iāll bother next time.
Sorry @Roaders wasnāt trying to shoot it down hard. Just trying to work out why it would be of Monzos interest to lose money on this.
Yes I know of offset mortgages, that playing with far high values of money to encourage the customer to keep their current account and savings with the same bank. Whilst a mortgage is a loan, we are talking different things here.
If Monzo directly offered mortgages and said weāve loaned you Ā£200,000 and because youāve got Ā£5,000 in savings with us so weāll only charge interest on the Ā£195,000 then Iād be cool with that.
Mortgages are different where whilst it pays to reduce the overall amount, you wouldnāt want to live having zero savings just to be able to pay off Ā£5k off Ā£200k and reduce the monthly by a slim amount.
I hope it hasnāt discouraged you posting.
Why doesnāt the āyou wouldnāt want to live having zero savingsā argument apply for paying off a loan?
I have a loan, I want to keep some savings āin caseā but I donāt want to pay interest on a loan when I have savings.
As far as I can see itās exactly the same situation.
The same argument applies to why would Monzo offer it - to encourage people to stay in the Monzo ecosystem and have both current accounts and loans from the same provider. It gives an incentive other than just having both products in the same app - a real tangible benefit.
Well thats a personal decision in balancing āEmergency moneyā and paying off loans with additional money.
If the bank has hooked you into a mortgage deal, and your mortgage is Ā£600, and accruing Ā£300 in interest each month, it can afford to lose a couple of quid in the offset.
And with a Monzo loan itās being offered through a partner and taking a 0.2%. They arenāt going to cut into this with the 1.x% you would be making on the amount from the lender.
The maths donāt work with personal loans.
You would be far better off going direct and holding that āin caseā money elsewhere like Marcus at 1.45%, deciding if anything above Ā£x k saved goes towards paying off the loan to reduce the interest.
No lender in the World is going to offer a personal loan where the person is allowed to keep hold of some of the loaned money and pretend the remaining loan amount being charged interest on is lower.
I think part of the problem will be that Monzo wonāt go anywhere near features/products that could end up costing them money - They are super risk averse right now, and likely will be for many years to come.
Established banks can offer stuff like this, because they can afford to. Monzo canāt, despite all of the massive valuations and huge numbers being thrown around, they arenāt profitable yet.
As a customer, Iād of course like to see products like that that can help other people out (seemingly at Monzoās expense).
As an investor and forum reader of 2 years, I know that just isnāt going to happen anytime soon.
Definitely worth the suggestion (that is what the forum is for after all), but the people who have been around this forum for a while, will probably feel itās a non starter.
I can see the benefit for the customer. Theyāve borrowed Ā£10k but pay interest on Ā£5k. But why would the lender be interested?