Weirdly the rates emailed to me and the ones through the app are now different.
Email: 3.7% £7.5K-£15k App: 6.1% £7.5K-£15k
My app percentages have gone up since i last checked (about 2 weeks ago)
I’d love to know whats changed in the last fortnight that monzo knows about my situation that i dont
Surely there should be a disclaimer in the mail to state these rates may not be correct for me?
If monzo are basing my loan creditability off of things like summary and budgets I think this is something id like to know as Id remove budgets altogeher if thats the case.
Jack here – I’m a Product Marketer here at Monzo and have recently started working on lending products! (some of you may have seen me around on business banking and main account threads before )
Just a quick note on rates – whenever we talk about our loans in a promotional context, we have to talk about our “representative” APR, which is what 51%+ of customers will see as their rate.
Everywhere else, we show you your personal rate. So, if you’re using the loans calculator in the app, you’ll only ever see the rate you can get. We do this because one of the main things people find confusing about loans from other lenders is that they’ll advertise a “best possible” rate, then when you actually apply, you’ll get a different version (which often doesn’t feel very nice, or representative of what’s advertised to you in the first place ).
We’ll only show your rate, and where we have to, show the representative APR (which could be different).
As I’ve mentioned above my rates have worsened in the last 2 weeks while not wanting a loan at the moment I’d love to know why monzo suddenly has changed my rate.
If i were to contact chat would I be given a reasoning on this or will it be a case of “we cant tell you the logic behind our lending criteria” ?
Or even worse will i be passed from specialist to specialist
My rationale is if im thinking about this others may well be too and raise this via in app chat(clogging up chat queues).
phildawson
(Sorry, I will have to escalate this.)
644
Are there still plans to improve the loans section with the Monzo loan score and with details of Monzos assumptions about you so you can check its correct.
Are you able to say how heavily your credit report with TransUnion affects your limit/rates vs the other factors like income/owning property/employment that are asked for in app and vs other factors like how often you use Monzo and incoming/outgoing payments.
I have a feeling that Monzo aren’t really too concerned about credit report unless you have defaults/CCJs/missed payments.
I also think Monzo aren’t taking income really into account as people with £100+ salarys with decent credit report haven’t been offered a loan or a crap limit/APR.
So that really leaves a heavy weight on Monzo activity in determining limit/APR ?
I find the concept of tiered rates on a loan product which also features unlimited, free overpayments to be the antithesis of transparent.
To use @Rat_au_van’s rates as an example, you could find yourself borrowing £7,000 at 12.9%, when in order to only pay 3.7% you’d simply need to borrow £7,500 and repay £500 straight back.
If Monzo allows overpayments like this, it stands to reason that it is not being transparent to some borrowers who may be unfamiliar with borrowing and APRs, and who may inadvertently request a lower amount.
If Monzo will allow me to borrow £500 at 3.7% simply because I understand how to play it at its own game, then it should really have a flat rate for all loans.
They aren’t doing a soft search upfront and yet the APRs are individual, I get the same rates as you, but they are different to one of the posters above.
You have been offered a rate - without much information, but given how far out of sync your result is with the rest of the market, if you apply their has chances are you may not be approved.
My fundamental concern is that Monzo have not implemented an upfront soft search. This means Monzo are offering loan APRs on proxy information such as postcode, spending on their Monzo cards and possibly postcode.
This means that a large portion of your account holders will be meaningfully mispriced - rejected if the APR is too low and they’ll never take a loan if it is too high.
I would have expected that you would do a soft search and as the lender you would then:
Would the customer be accepted
What the maximum amount they could borrow
What would be their max monthly repayment
Then using the information on the file give a brief explanation of why the results showed as they did.
This would allow increased user education, increase the likelihood of acceptance and and it would have differentiated Monzo from any other lender.
I am sorry to say the current offering is really disappointing, I am sure Monzo will be able to check whether my concerns are valid from the loan enquiry >> application>> accept rate.
In addition Monzo will probably be able to do some retrospectives with the bureau on shadow scorecards to see what percentage of their accepted applicants would have got better or worse rates elsewhere.
I did exactly this - I needed 3.5k to pay off an existing loan at a higher rate, so I borrowed 7k and immediately paid back half… now I’ve got a 3.5k loan at 3.7%
I was initially eligible for £15,000 and then it went down to £3,000 after a few weeks and now seems to have stabilized at £7,000.
I spoke to one of the team at Monzo about the eligibility criteria and (at least in my circumstance), they had a pretty accurate picture of my earnings and spending’s each month which gave them an amount that I was left with per month - this seemed to weigh pretty heavily on eligibility.
However, it didn’t take into account that 60%+ of my income is currently disposable and that I put X amount into savings outside of Monzo.
Here is in the conversation, with the obvious personal information redacted:
It really just looks like they are counting any money that you don’t keep with Monzo as “spending” - when in reality you (and I) are sending money elsewhere for saving.
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phildawson
(Sorry, I will have to escalate this.)
653
I make
£5k loan over 5 years @9.3 is £6,216.69 = loan costs £1,216.69
£5k loan over 5 years @6.1 is £5,790.89 = loan costs £790.89
So if you plan on keeping that loan for the full 5 years.
£1,216.69 - £790.89 = £425.80 saving by taking out £7.5k and immediately paying back £2.5k
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phildawson
(Sorry, I will have to escalate this.)
654
I think this is the reason why so many people are confused why Monzo won’t give them a loan or at a very crappy rate compared to elsewhere.
Decent credit report, no missed payments, no defaults, no CCJs.
Decent/ok salary
Don’t keep savings with Monzo, or have your salary paid into a different account and transfer a bit to Monzo for monthly spending
Before recently switching to Amex I used to transfer £2k for monthly spend (not used for any bills/savings etc). That would reach near £0 and be topped up again the following month.
If Monzo are basing it heavily on this then I probably look reckless to them.
Now I keep only the bare minimum to cover non-amex/atm so it’ll be interesting if thats affects it next month, although I’m not sure how worse it can get with almost 30% APR.
So does this mean the “interest to pay” is recalculated on a daily basis.
I thought it was more a case you’ve agreed to pay a set amount (in your case £6,216.69)
So all you’d be doing is paying off the agreed amount sooner and reducing your monthly payments?
Would be very happy if this isnt the case, its for the way you mentioned it is the reason why I usually take all personal loans from my credit union so that I can repay more off it when I want and reduce the overall interest id need to pay.
phildawson
(Sorry, I will have to escalate this.)
656
Nope thats just the amount it would be if you made no additional payments and kept paying the same monthly amount for five years.
Its always best to check at what limit you get the lowest APR possible and then simply repay the additional borrowed the same day you get the money.
Sites like Zopa tried to put an end to this by upping the ‘handling fee’ depending on the amount taken. So as an example
If you want £5k we charge you £100 for it, if you want £7.5k we’ll charge you £300 for it.
But even with the example above pretending those were Zopas with £425.80 would be a £225.80 taking the handling fee into account for taking the larger amount initially.
Monzo haven’t done this handling fee thing so it always makes sense to take the amount to get the best APR.
Perfect, thanks for clearing that up.
Much appreciated
Haven’t taken a loan with monzo yet so was a bit blind to the flow of it all
phildawson
(Sorry, I will have to escalate this.)
658
My only other advice is avoid taking loans because of wants and only use them for needs when you simply can’t avoid needing to borrow and have zero savings.
If you already have debts at higher rates then doing the ole switch and transfer like @FlyingDutchman@Rat_au_van makes sense.
I’m baffled by the algorithm used for this. I have a 999 credit score on Experian, an active (but not in use) 1k overdraft in Monzo, 3.5k in investment pots between my solo and joint Monzo account, various lines of credit not being used, and I’m not eligible for a loan.
Would love to know how it’s gauging whether or not we can borrow. Would be nice if it were a little more transparent in app.
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