As a few have said the thing I’d worry about is what if I didn’t get the option post purchase. Will there be a way to see how much credit you’d be likely to get before you go out and buy something?
I personally would probably stay clear of it, but only due to the fact that I am still paying off credit cards from a slight splurge of items I had to get when I moved house. I dislike owing people money so am trying the YNAB approach. However it’s nice to know the option is there especially for the reasons listed above by peope like if my washing machine were to die and if I hadn’t budgeted for that.
I thought it’d be useful I gave some additional context on this. As the title of the link says, we put together this prototype for our Testing Tuesday aka user testing session in early May. It’s an early prototype of something we’d been exploring alongside our overdraft feature to capture different use cases for users that require credit.
However, it is still very early stage and we weren’t quite ready to share this sneak peek yet. This is an MVP, which means we might not actually roll out if it doesn’t validate our assumptions behind it. Our primary focus at the moment is to understand whether this feature could solve the use cases we are targeting and whether we can do so in a delightful and Monzo way. There are lot of elements that we haven’t fully explored but that are shown in the prototype as placeholders. Moreover, we have completed a few iterations of the prototype following user testing and we have now started internal staff testing.
There’s a lot of interesting questions and points raised in this thread so I’ll try to address some of them but do @ me if you have any other question:
Not quite. We still report to credit agencies the status of your outstanding loan and the repayments. However, when you repay on time it has a positive impact on your credit score.
We wrote a bit about it here but the “size” of your credit file doesn’t have an adverse impact on your credit score. In reality, the “thicker” your credit report is the more likely a lender is to lend you money. What’s important is that you only take out loans you can afford (and as a bank it is our responsibility to make sure that’s the case) and pay on time!
I can’t stress this enough.
Here is how we are thinking about these two features at the moment:
Overdrafts are really an emergency buffer and the main use case is for when you’re a little out of budget in a given month but still have important payments that will come out before your next pay cycle. Bouncing a direct debit (e.g. mortgage repayment) is actually pretty serious and can have an adverse impact on your ability to obtain credit.
What we are working on is a way for you to make extraordinary transactions that don’t necessarily belong to one given month’s budget but that severely impact your cash flow. Some examples are flights and holidays but also things that are annual in their charging nature (e.g. my water bill comes out once a year and it has a serious impact on that month’s budget).
This prototype might not be the solution to 2 and we might never release it but I hope our intention / goal is clear
This is so spot on the use case that we have in mind and that we are trying to solve for
I’m not speaking on behalf of Monzo for this but I don’t personally recall us being against charging interest rates. We are definitely against fees and charges that are not transparent or necessary. Our overdraft feature uses a daily fee express in £ after we put it to the community to decide.
However, regulation around loans is different and we are required to quote APR that are calculated in a standardised way.
Having said that, this is still an early stage prototype and our focus at the moment is not around pricing but rather demand and usability. We want to first build something that actually feels awesome to use and then clarify all these other questions.
This was actually raised in the user testing session we had around this prototype and it has been taken into account in later iterations
This is what I hope we can achieve but it will take us some time to get to that position as we need to build our understanding of the credit risk involved in this type of lending feature.
I’m the Product Manger working on our lending features. I’m sure you’ll have a ton of questions on the following post, and I’ll try and answer them over the next few days, but first here’s a quick update:
We’re starting to test a new lending feature, and we’d like to get you involved!
A month or so ago there was a sneak peek of a new lending feature we’re working on. It’s evolved quite a bit since then, and we’re now at a stage where we’d like to start testing it with community members.
Valerio explained how we’re thinking about this new feature in relation to overdrafts.
It’s a loan, of up to £1,000, that you’ll pay back in fixed amounts each month.
If you meet our lending criteria you’ll be eligible to borrow up to £1,000, which you can pay back in monthly instalments with interest. Currently we’re limited to a three month repayment, we’re hoping to expand this soon.
It’s still very early stage, so your feedback will help shape it.
The feature is still early stage, and so there’s a few rough edges. We’d like to open it up to a small group of community members to give us early feedback on the experience, and play a part in shaping it into a feature we can release.
You’ll need to be on iOS, Android will follow next week.
As an android user myself I can understand that this is a pain! Phil, the android engineer in our team was seconded to work on savings for a week (due to holidays) and so we’re a week behind. The iOS app landed in the app store on Monday so we’re literally testing in real-time!
If you’re interested, please fill in this form with the email address that’s attached to your Monzo account. We’ll quickly check whether you meet our lending rules (don’t worry, this won’t affect your credit score) and I’ll get in touch with some of you later in the week with next steps.
If you can only borrow a maximum of £1,000 why wouldn’t I just use my overdraft to avoid having a search on my credit report? I assume that the interest will be less than the £20 per month that you’d charge if I was to use the overdraft?