We've added the option to borrow more on top of your Monzo loan 🧮

[DaniShipp]

Hey Community

I’m Dani - a Product Marketing Manager at Monzo working on loans and overdrafts.

I wanted to share an update on a new feature that’s been asked for a few times over here…

We’ve heard that you generally find Monzo loans pretty simple and easy. But one piece of feedback that’s come up a lot is that it’d be handy to be able to increase your loan amount. Perhaps your kitchen renovation turned out a little more expensive than expected – or maybe it’s within budget, but you now want to buy a new car.

For times like these, I’m pleased to announce that we’ve now launched the ability to borrow more on top of your current loan!

If you’ve got a Monzo loan, you can check if you’re eligible to borrow more by navigating to your loan in the app and tapping ‘borrow more’. You’ll only be able to check if you can borrow more if you’ve had your loan for at least six months, and you haven’t missed any recent repayments. And we’ll do a new credit assessment to make sure that a larger loan is affordable for you.

If you’re eligible and decide to borrow more, we’ll set up a new loan for the extra amount, plus what you’ve got left to pay in your current loan. That means you’ll have a new single loan with a single repayment each month, on the day you choose.

Before we dive into some screenshots, a few important notes:

• Borrowing more could mean you pay more interest and cost you more overall. We’ll always tell you how your payments and interest would change, so you can decide if borrowing more is right for you.
• 8.8% representative APR for loans more than £7,000 up to £15,000. For loans up to £7,000 it’s 22.8% representative APR.

Here’s a little peek at how it all works…
Please note: these screenshots contain example data that is not necessarily representative of the rates available.

You’ll find the option to borrow more underneath your loan card.

If you’re eligible, you’ll see how much more you can borrow and how it’ll affect your monthly payments, with a clear breakdown of your new loan.

Before you confirm the new loan amount, we’ll show you how your payments will change, so you can make sure it’s right for you (the new loan could be at a different APR).

Any suggestions or questions?
As ever, we’d love to hear any feedback you have on this new feature. And I’d be happy to answer any questions you have!

[Jays6]

Why is the interest soo high up to £7k then makes a massive drop to 8%. My monzo loan is something like 6% why cant you stay consistent and do the right thing. You dont have to make hundreds from borrowing to people!

[lpoolrob (Rob)]

@DaniShipp

8.8% representative APR for loans more than £7,000 up to £15,000. For loans up to £7,000 it’s 22.8% representative APR.

I’m a little out of touch, but those rates seem high compared to the rest of the market?

[Jays6]

Absolutey. No incentive to borrow from Monzo here. This is just clearly not doing the right thing. Why cant there be a company that can stand out from the rest and be better about money and borrowing. This isnt making money work for no one!

[Ordog]

@Jays6

Absolutey. No incentive to borrow from Monzo here

Just borrow over £7k to get the lower rate and instantly pay back whatever you don’t need.

Not sure why they can’t just offer a lower rate though

[Ordog]

@DaniShipp

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This is a nice touch and overall it’s a great feature to have

[monzo2018]

Are loan payments included in Committed Spending yet?

[Revels]

You do realise Monzo are not forcing anybody to get a loan?

I had a quick look at Natwest and they do the same large increase in % at £7k (granted from a lower base) but this is a feature people have requested and it’s good that it now exists.

[Ordog]

@michaelw90

No idea why

Larger amounts of borrowing mean they make more money

£1,000 @ 10% = £100
£10,000 @ 5% = £500

So lower amounts need a higher interest rate to make it worthwhile.

Whereby with larger amounts, it sounds like you’re paying less interest but they’re making more money. Plus larger amounts are generally taken out over a longer period too.

[breville_monkey]

Just because it’s not new, doesn’t mean people can’t bring it up though?

There is an odd logic there because surely if you borrow more the risk is higher, not lower.

[Jays6]

@breville_monkey

Just because it’s not new, doesn’t mean people can’t bring it up though?

[tbutz (🏳️‍🌈 Producer of "low value commentary")]

If there’s a discussion to be had about the tiers of loan rates versus amounts and looking to disrupt that paradigm, then that should be done on a separate topic explicitly for that purpose, I don’t think it helps to have a war of words on this topic, which is about a mechanism being provided to allow people to manage their loan needs better.

[Rat_au_van (Em)]

you think they still issue giros?

Also bold move to say you want money to work for everyone and then insult people on benefits

[Revels]

@AlanDoe

Clean up on aisle 3…

[tbutz (🏳️‍🌈 Producer of "low value commentary")]

So disappointing when a topic turns into this kind of nonsense. No matter what people think of each other I don’t believe it’s appropriate to make directed comments in this way. And the slurs about people who claim benefits is really not on.

[davidwalton (Award Winning Hot Coral Analyst)]

From an announcement of a newly released feature (which looks great by the way), followed by initial positive discussions - to a flag-fest in just over 3 hours

[TheoGibson]

On the topic of interest rates it’s worth bearing in mind 2 things:

• These are representative APR’s - which means 51% of customers receive this APR or lower. This means that it’ll be based on both the APR’s of loans on offer and the distribution of loans taken out - the prices for individual customers may be lower or higher.

• APR doesn’t capture the full story because of some sneaky things done by some lenders such that a higher APR may actually be cheaper. The three main reasons for this are upfront fees, early repayment fees and missed payments fees (of which Monzo has none).

For example:

• A £1k loan at 10% APR over 24 months will cost ~£100 in interest.
• If you repay the same loan early at the 6 month point (with no fees) it’ll cost ~£40.
• A £1k loan at 8% APR over 24 months will cost ~£80 in interest.
• A £1k loan at 8% APR over 24 months with an upfront fee of £20 (2% of origination amount) that you repay early at the 6 month point will cost ~£46.

You can then add on £12 for any missed payments and/ or any early repayment fees.

For now, we’re treat new customers the same as existing loan customers in terms of fairness and transparency. All lenders rates will change over time based on a number of factors. We have changed prices since we started offering loans in 2019, so the rate for further borrowing might be higher or lower than your current rate - but we’ll always be transparent, and definitely flag this when the rate is higher. The interest rates offered are something that we’ll continue to evolve and iterate on over time as we gain more data.

Some notable things that Monzo does “do differently” (maybe not to every lender but compared to most):

• You’ll get an automated approval and don’t need to wait around for a manual approval.
• You’ll get the money when you accept the T&C’s rather than the next day or later.
• No missed payment fees, no upfront fees and no early repayment fees.
• You can see your live balance in the app at all times and make additional payments whenever you want.

Also don’t get me wrong - there are things we’d love to (and will) improve even further such as paying your monthly payment from a pot but we’ll get there in time. If you have other things we can do to improve the product and experience (especially in relation top ups as this is a new feature), we’ll try to take the feedback on board!

[Jays6]

Love it