Loans

Making Monzo
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.

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657

Perfect, thanks for clearing that up.
Much appreciated :clap:

Haven’t taken a loan with monzo yet so was a bit blind to the flow of it all

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.

2 Likes
659

Originally I was eligible for £15k and £750 overdraft

Now I had a look and I’m eligible for £1k overdraft but only £7k loan… I’m curious if it’ll change again eventually

660

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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661

I can almost guarantee that will have zero bearing on it.

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662

Agreed but I was just anchoring all my ‘investment’ in Monzo and personal status. I don’t actually want the loan, but would like to understand a little more why it’s not an option for me :crazy_face:

663

Drop them a message in app. I’m sure they’ll let you know why.

664

Are you “in the know” when it comes to the internal algorithms used by Monzo?

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665

I’d be amazed if they used a credit ref agency they didn’t report to as a method for judging credit worthiness.

But I’m also saved by the word “almost” if I’m wrong.

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666

You may be right but many lenders check with multiple CRAs despite not reporting to them themselves.

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667

I’d tend to agree, but with the caveat we’re talking about a system in infancy here rather then an established lender.

668

There’s a lot of speculation here.

I’ve got quite a bit of experience with lenders in this area and it’s something that varies so much in the market. Personal loans are rather simplified though, so I’ll run through my thoughts for anyone interested.

From what I can see, Monzo appear to be relying on feedback from CRA regarding credit accounts, and estimated income levels from cross-referencing the CRA feedback on income and their own data on accounts. Many others rely on this CRA data cross-referenced with a consumer-supplied figure.

CRAs do provide a figure of estimated income levels because this sort of information is fed back from banking organisations.

Just the other day I asked Monzo about my loan eligibility (I’m currently not eligible, and was only ever eligible for £1000 before the full rollout). The reason I asked was because 1) I have a reasonable amount of spare money each month (that Monzo don’t directly see) and 2) I previously wasn’t eligible for an overdraft when my partner (earning less than 1/15 of my income) was instantly given a £1000 overdraft on sign-up! I checked this out and it seems there was a system issue and once manually overturned I was given an overdraft of the same value. Anyway, I was told (fairly bluntly) that my eligibility has not changed.

The point is, Monzo has an extremely conservative lending criteria and will likely go with a customer they are able to predict then somebody they cannot, no matter how much they earn. Not once was I asked for my income details. This is what leads me to believe that they’re relying on their data for this. I don’t disagree with this approach in anyway - after all, they’re a tiny player in this market and need to be sure they can turn a profit in this area.

Unfortunately for me, if I wanted a loan I am probably hindered by being self employed with irregular income, all sorts of “outgoings” (albeit savings and investments of sorts), and maybe wouldn’t even generate enough profit for them to consider.

Much speculation of course, but it’s likely this is all we’ll ever have on this topic for obvious reasons.

1 Like
669

Just adding that for ~4 months the bulk of my money wasn’t coming into monzo and they asked me my income when I clicked on loan.

670

I agree, lenders don’t see the pointless CRAs score, they see your file.

671

Hi everyone :wave:

I’m Amy and I’m the Product Manager for Loans at Monzo.

I just wanted to re-share an old post of mine to shed a bit more light on how we determine who is eligible for our loans:

I hope this clears up some of the questions that you’ve raised. We’re really sorry if it feels like a ‘black box’, we’re still trying to find the line between transparency and our commitment to being a responsible lender (which means not giving away too much information which could be used to allow people to game the system).

We really appreciate your feedback and I’ll try and answer any other questions you might have about our loans!

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672

How often are people reviewed? Is it automated or does it need to be requested in app?

For example. I had an erroneous default on my report which has since been removed. I would like to see if that now makes me eligible :slight_smile:

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673

@jackcully
Thank you for the explanation on APRs I had realised you were doing personal rates, but I am still confused as to how you are working those out along with affordability without a soft credit search?

My assumptions as outlined above is that you are using proxy information and that will mean the percentage of customers mispriced upfront will be high and therefore the decline rate and those overpaying vs the market will be high and in both instances cause customers to overpay or end up with blemishes on their credit files.

If we are misunderstanding your approach, please do let us know.

Is it fair to assume you are not doing the soft upfront credit search as you are worried about the costs of the searches from those curious about the new service?

674

Hiya :wave:

We get refreshed data from TransUnion each month and we’ll automatically reassess eligibility based on this. You should get a notification if you become eligible!

3 Likes
675

Hi all,

I have had a direct reply from a contact at Monzo who I reached out to directly and he confirmed that a quotation search happens when you first start the journey (I can also see this on my Credit Karma account).

The trouble here was down to the wording on the review your loan page…

We’ll do a credit check
Before you take out your loan, when you accept the credit agreement. This will leave a footprint on your record.

This implied that there had not been a credit check until this point, both by stating that they were going to do one and that it would leave a footprint.

Quotation searches are credit checks, they just aren’t visible to other lenders…

It was a relief to hear that they were not quoting on proxy information, but would have been better (IMHO) had the information been clear upfront that the quotation search would happen and not imply that a search hadn’t happened when it had on the review your loan page.

Hopefully they will amend the text shortly. The rates on loans under £3k still suck, but for loans over £7k they are competitive.