So I just got myself a loan from Monzo, 4.7% - used it to pay off my HSBC loan (basically switching suppliers) and I have to say I am so far loving the Monzo loan
The interest rate is a smidge higher, works out to be I pay an extra £100 over the next 2 years but:
I can make small extra payments whenever I want and that actually brings down my monthly repayments, which ultimately brings down the interest I pay!
I can pay it all back in one go, when I cleared my HSBC loan today I had to wait on the phone for 30 minutes and then go though the whole transfer funds process etc. in total took about an hour.
Monzo is now getting my money instead of HSBC which can only be a good thing?
The freedom the app gives in managing my loan has won me over big time.
Not really, if the Monzo loan gives me greater power over my finances, repayments etc.and the ability to budget better then that makes it a better loan in my opinion.
If the Apr difference was 2, 3, + % higher then yes it might not make sense. But it isn’t, it’s a smidge higher and the freedom I get in return, the control over my finances is worth more than being tied into a “slightly” cheaper but inflexible loan.
Though if you were paying 3.3% at HSBC and 4.7% at Monzo - you do realise that’s a 40%+ difference in the interest rate… - and HSBC also let you make overpayments…
I noticed something was brewing a few weeks ago when my almost constant block on a loan at the ‘cannot confirm income’ stage (which I’d been stuck on for about a year, even after a complaint) offered me a £3k loan at a ridiculous 26%.
I took it (wrongly) to be because I re-signed up to Monzo Plus and that somehow unlocked loans for me. Instead, it looks like its because loans were being relaunched and must have done some backend improvements.
Today its dropped to the 7.5% and up to the max £15,000. Shame it’s not offering me the good 4.7% but at least it’s an improvement from a month ago.
I’d also add that with other lenders there’s often a late payment fee or some other hidden fee. Late payment fees are usually £12 at most high street banks, so not an insignificant amount. (I searched for HSBC online but couldn’t find if they do this or not).
Ya see, I do not put my entire salary into Monzo either (mostly because I have a mortgage and things with my old bank), but for 4 years now Monzo has recieved a steady stream of funds for day to day spending and I’ve had access to apply for a loan for some time.
So you don’t need your salary with Monzo, just need some activity!
I understand people’s arguments and true you can make an overpayment with HSBC, but you have to set it up as a bank transfer and it doesn’t do anything to your repayments, plus you can’t see what the settlement figure is without ringing them up and waiting for an hour.
Today with the Monzo loan I was able to see how the repayments change if I paid off different amounts.
Monzo:
What happens if I pay an extra £5 this month? New repayment shown.
What happens if I change that to £15? new repayment shown.
Oh I have a spare £3.24 at the end of the month, pay into Monzo loan and see my repayments change.
HSBC:
What happens if I pay an extra £5? Let’s ring HSBC, 30 minutes later someone answers, “ok sir we get you a settlement figure”, “I don’t want a settlement figure I want to see my repayments change”. 30 minutes later here is your settlement figure.
But what happens if I pay a bit more off? Ring HSBC again, wait again. Please wait while we get you a new settlement figure.
Do my monthly payments change? “No sir we can’t change your repayments without having a brand new loan you just have to keep ringing us for a settlement figure and then get your calculator out to figure out blah blah”
Like I said, for me having the freedom to completely manage my loan is worth a small increase in APR.
I’ve gone from never being offered a loan before to up to £15k at around 6.2%-6.3%.
Seems reasonable, I know there are cheaper headlines rates out there but I have no idea if I would be eligible for them as I have no need for a loan. My credit rating is excellent (999 with Experian, a bit lower with Transunion) although with a few K credit card debt still outstanding at 0%. I’ve been full Monzo since the beginning with my salary being paid in and a host of direct debits going out so it always miffed me that I wasn’t eligible for anything before.
Hoping that some shorter/smaller lending options become available as well. Would be nice if I could finance my upcoming football season ticket on it for instance.
I’ve been quite happy with the loan product since I took one out last year - good rate at 3.7% and easy to manage.
I personally prefer to pay larger monthly amounts over a shorter overall term, but clearly the internal Monzo decisions don’t like that - so I just make regular overpayments.
One thing I wish the “Make an extra payment” screen did was to also show what difference the overpayment will make, not just the new overall “left to pay” amount.
For me at most loan amounts I can get a slightly better rate through Zopa. Some loan amounts have a much bigger difference. I can get much bigger loans through Zopa than through Monzo, but I can also get smaller loans under £1000 through Monzo. That’s even with being half way through paying off a lower APR loan through Zopa started before the pandemic. (Zopa were the easiest to compare to).
Though for a few thousand £ a 0% credit card can work out much cheaper.
The Monzo rates are much better than I had in the past, which is a good sign, but not quite yet competitive enough to go for.
Exactly this.