Discuss Klarna, the point of sale lender, below
This conversation started in the Monzo in the Media thread, with this post:
Slightly off topic but anyone understand what the difference is between a pay day loan company and companies like klarna as it looks like a reskin of the same defective and predatory product
Klarna is nothing like a pay day loan company. It’s just interest free financing for purchases. They get their money from the retailers.
Yeah but the retailers do get that money from the
increase in average order value and higher conversions at checkout.
I know. The point is they’re nothing like pay day loans.
yeah I agree it’s not that similar to a payday loan but equally it may not be as simple as interest free finance and I guess that’s what that article is saying.
I’ve not used it so I don’t know how clearly they differentiate between the simple “pay later” aspect (14/30 days interest free credit) and the other options which appears to be more like a store/credit card.
Pay it all off before the interest kicks in and it’s free credit. But pay the minimum payment and the valve will incur interest at 18.9% APR (variable).
Which doesn’t seem like that bad of a rate when you do compare it to other credit cards and is nothing like the 1000%+ or payday Loans hay day.
I’ve just read through that article about Klarna - the way they frame it is awful. There’s an article linked to within it about a girl who bought something and paints Klarna for being evil but doesn’t seem to place any responsibility on the girl who took out a loan and refused to pay it. She could have just as easily not purchased new clothes.
It total agreement if you can’t afford it don’t have it simple. You can’t keep blaming others for your poor life choices. New clothes and debt, or actually learn a lesson and budget. People can’t blame Monzo, nor anyone else. It’s their responsibility to read ts and cs.
Basically grow up!
The worst part was the article kept going on about how well she’d managed her payday loans in the past so the experience with Klarna was ‘shocking’ and now she felt she couldn’t make repayments to any future debts because it’s too stressful. It’s just ridiculous.
Even though signing up to credit in my opinion is easy now, it doesn’t in any way make it appear as though it’s free money or that it doesn’t need to be paid back. Whilst I’ve never been eligible the screenshots of Monzo’s overdraft application seem remarkably simple but it’s abundantly obvious that it’s an overdraft and that it needs to be paid for. I never agreed with the 50p a day charges but the cost is very clear and obvious I have to admit.
If someone(of the coral variety) could put all the post that related to Klarna in a new Thread that would be lovely,
just as I saw this reported in the bbc(Its not Monzo but interesting none the less)
Klarna also victims of their own success here. The journalist (or sub-editor) isn’t representing the situation fairly. There is a difference between a soft credit check to see if you’re good for credit and then reporting you when you don’t meet your responsibilities. It’s fair on other lenders and possibly safer for the borrower when companies report back centrally.
Done! Use this new and shiny thread to talk Klarna
The idea that 30d credit is a worthwhile service on non-essential goods/services is something that gives me plenty of reason for concern. What is worse is how this ‘unicorn’ company is touted as being some revolutionary firm that people should aspire to replicate or work for.
If you are buying a good because klarna gives you the opportunity to buy it before your paycheck, then you should not be buying anything. If you can’t afford to pay for an item in a few sizes and then wait the short period of time for a refund to be processed for the items that do not fit, you should not be buying anything. This service is targeted at young people with its ‘smooooooth’ ads which put zero emphasis on being financially responsible. It encourages extremely irresponsible personal finance behaviour and I think it should be banned.
I would be a little bit lighter on the situation if I saw it was being offered with boiler sales, or washing machines… but the vast majority of the merchants that have taken the service up are fast fashion brands and retailers that sell goods with very little utility.
The debt machine goes marching on!
Playing devils advocate here, but surely Klarna is the nicest implementation of this sort of service you could imagine? I mean fresh off the back of Wonga et al, they could be much, much worse?
Hmm, I suppose, although as mentioned they are not a payday lending service so I guess I am more concerned about the sector they have created for themselves rather than them vs any peers (I don’t know of any others).
I consider it as predatory as some of the gambling ads I am seeing which encourage people to bet on a ‘hunch’… suggesting you should throw caution to the wind effectively.
I remember when I had a student loan at uni it would always be a struggle to get to that next payment date. I can only imagine how difficult people find it now with such an array of spending options.
Purely from a personal point of view, I’ve really enjoyed using Klarna. I’ve only used it with 2 sites - ASOS and H&M - but it’s allowed me to order things to try on without the initial cost, and then return them if they don’t fit/suit.
It’s come in pretty handy over the past year, especially trying to find maternity clothes (the lack of these on the high street is pretty annoying) and post-baby clothes. It’s not so easy to get out and about when coping with morning sickness or looking after a newborn!
I will say that I’m careful with what, and how much, I order. I’ll never order too high a value that if I keep everything, I won’t be able to afford it. It updates quickly with returns and it’s reeeeally quick to pay off in the app - and I normally pay it as soon as I can!
I haven’t tried out the split payments, but can see it coming in handy when buying more expensive but not alarmingly expensive things (ie a £150 item that I can budget better by spending £50 for 3 months).
This is exactly why I used it too. It’s not that I couldn’t afford the clothes for 30 days it was less using it as a credit product but more of a convenience.
Perhaps, but both services when used correctly and responsibly are entirely reasonable services. The problem is when the greed kicks in and the loan book risk doubles.
I really wonder how this will play out in the long term. It’s great that this service is available for those who need it and the marketing strategy (modern youthful ads and collabs with celebs and influenzas [not a typo]) is really interesting.
I’m one of their customers - not through choice though. I’m on the Samsung Upgrade Plan and the financing of the handset was moved from Close Brothers to Klarna part way through my contract. I’ve got nothing negative or positive to say about my dealings with them though