Why we’re lending


#26

Let’s find out what sort of overdrafts are being offered!

  • I have been offered an overdraft of less than £100
  • I have been offered an overdraft of £100-£500
  • I have been offered an overdraft of £500-£1000
  • I have been offered an overdraft of more than £1000

0 voters


(Tommy Long) #27

And Monzo have told you the most they’re prepared to lend you based on their criteria and your circumstances. I’m sure in the future as the model matures they might well increase that.

This is one of the short-comings of a fixed 50p/day interest model, the incentives push everyone who is using their overdraft to borrow the most available and the incentives push Monzo to keep everyone in a very small overdraft.


#28

What about “I’ve not been offered an overdraft”


#29

Good point! Too late for me to change it :slightly_frowning_face:


(Rob) #31

Would be great to get an explanation of why you have been offered a particular rate for a loan, I found it infuriating search on money supermarket or the meerkat one for a car loan. It kept listing banks offering 3% but when you start the application it would go up to 7%. It would be great if Monzo had an open and transparent system explaining how they work out what rate they offer different people.

I don’t know how banks work it out but in my head I’ve assumed it’s linked to your credit score. So it would be great if banks just said so and told you what rates they offered for the different credit score bands. I’d imagine all it would take is something like the below:

Loan interest rates based in experian credit score:
Very poor: 0-560 = loan not available
Poor: 561-720 = 8%
Fair: 721-880 = 6%
Good: 881-960 = 4.5%
Excellent: 961-999 = 3%

They could tell you your score and even offer advice on how to improve it.

If there are further things they check then these should also be explained.


(Micky) #32

HSBC are bad for this. You apply for a loan and figure out your repayments amount only to then get a different interest rate after the credit search which bumps up your monthly payments. The rest of the process is pretty good though and it has options like no payments in January etc and you receive the money instantly


(Ben) #33

Woo! So I’ve been invited to the loans.

For reference since the overdraft topic comes up - I’ve been approved for an overdraft of £1000 (not sure I can go higher?)

I get a notification in the feed “You can now get a loan from Monzo, head to the account tab for more info”.

On the account tab, it’s not overly obvious at first glance what I’m supposed to do:

With phone in hand, the intuitive behaviour is to Swipe Right through the pots, couldn’t see anything there. Thought there might be a “Loan” button but turns out I needed to swipe left to the lowish contrast thin yellow outlined box.

(Phone not at 100% brightness, this is hard to see, especially if you have any form of “night colour mode” on your phone! FYI).

I guess it’s not often you’ll apply for a loan - but the expected behaviour of where to find it could be more clear, I believe.

In the loan box itself, I’m eligible for a £1000 loan, up to 12 months. At the maximum value of £1000, I’m offered an interest rate of 20.4% APR.

Click the “I’m interested” box, and I get a summary of T’s and C’s - 14 days to cancel, impact if I have an overdraft, missed payments - interest is charged on missed payments, and they may take legal action - but no clarity if there’s a missed payment fee?

Next page gives you a Credit Agreement page, with full breakdown of Stuff - which explains no late payment fees - but does say “our rights if you miss a payment or we have other concerns” and outlines how they charge interest, and can recover the loan etc etc, plus other legal stuff.

Overall, it’s quite a pricey loan (for me at least). The £200 minimum would come with 18% interest. Quite high compared to the market in general, but I’m not sure if that’s the same APR that other people are seeing?

EDIT to add:

  • It seems the market place, in general, is offering 1 year loans of £1000 for between 7% - 10%, so perhaps it’s better used for shorter term things
  • Even so you are likely to get better 0% purchase deals on credit cards than this may offer - and given some feedback on the Overdraft, it seems like people who are unlikely to hit eligibility criteria for those offers, would be unlikely to hit them for the Monzo Loan product too (I suspect).

Overall - I’m not certain what space it would fill in my own finances.


(Ben) #34

Just one more comment based on the blog post:

  • How much interest you’ll pay and how much borrowing will cost you isn’t always clear – important details like the interest rate and cost are often hidden among heaps of other information, and it can be difficult to translate percentages into how much you’ll actually pay

I’d say the current design the opposite is true; the repayment value is clear but the APR is hidden away. I’d like both to be clearly and equally sized if clarity is the key.

  • Some lenders advertise different rates to the one you’ll get – lenders often advertise interest rates, without making clear that only a percentage of people will qualify to get them

And again here, Monzo haven’t advertised any rate in the process - and I can see the APR varies on the amount I choose to borrow, so I think this slightly misses the mark in the current implementation too. I would view this as being just as problematic as advertising a rate that only a percentage will get.

According to this page there are some rules around advertising credit;

The example needs to be representative of agreements which are expected to result from the advertisement and - in most cases - must include the following standard information :

  • the rate of interest - rules on how this can be presented depend on the terms of the credit agreement
  • any fees or charges included in the total charge for credit
  • the total amount of credit - the sum available to the borrower, so excluding any financed charges
  • a representative annual percentage rate (APR) - this must reflect at least 51 per cent of the business expected to result from the advertisement
  • the duration of the agreement - not required for open-end agreements
  • the total amount payable - not required for open-end agreements
  • the amount of each repayment of credit - not required for open-end agreements
  • if relevant, the price plus any deposit required to pay cash for the goods or services instead

This standard information must be clear, concise and presented together. For example, with a print advertisement, the information could be grouped in a box and mustn’t be scattered around the page.

Each item of standard information must be given equal prominence , while also being more prominent than any other details in the advertisement that relate to the cost of the credit.

I’m aware the application in app is not an advert, however I think it would be important to follow the “equal prominence” bit of some key bits of info.

I appreciate the new product offering and how it’s done differently, but I personally see some small gaps in the implementation that would make it a more solid and consistent offering.

:slight_smile:


(Jamie 🏳️‍🌈) #35

Thank you :monzopride: Monzo for referring to a loan application affecting a credit file, rather than the ubiquitous, but fictional, credit score.

I feel a small victory has been won here.


#36

I’ve been one of the few hundred who got this before today’s post. I haven’t yet taken one out, but it’s something I’m going to consider over time, should my budget allow for it and should I need it.

I’ve had a look through the flow, though, and it seems pretty astonishingly straightforward.

It’s great to see a loan that’s upfront about the interest you’ll be charged — I’ve seen a fair few people be surprised or upset as they thought they’d be getting an interest rate of around 3% on a loan, only to get an offer of closer to 20% when their bank’s underwriting team makes their decision. Really strongly agree with @BritishLibrary though — the APR should be prominent, as prominent as the actual interest that you pay, so people can easily compare between providers.

It seems like these loans are more about spreading the cost of a medium-sized purchase then spreading the cost of a big purchase — it’s certainly doing lending differently, because no legacy bank really covers this market with a loan product.

The thing that makes me happiest, though, is the loan menu’s button to get help with repayments. People really don’t get clearly signposted to places that can help them through financial hardship, and putting that front and centre should be standard for any bank. Too many times with legacy banks, something has gone wrong before they get help. I’m glad Monzo isn’t like that.


(Is Santa here yet?) #37

I’m glad you’re protecting your cat’s privacy in that photo :joy:


(Andre Borie) #38

You can replace a compromised card. You can’t replace a compromised cat so obviously the cat takes precedence.


(Ben) #39

I think he’s about done with me posting his identity online so only fair!


(If there's the wrong end of a stick, you'll find me holding it.) #40

You can replace a compromised cat with a brand new Badger


#41

Hey Bea

Please can you guys and girls make it easier to find the loans section in Accounts Tab took me 15mins and I work in IT :man_facepalming:


(Rob) #42

Wow am I reading 20% APR? Is this the going rate from Monzo or just what’s being offered to people with a terrible credit history? Will be great to see transparency around how Monzo work out what percentage rate they offer to people.


(AllanW) #43

I think it’s strange that the APR increases with the more you want to borrow.


(Andy) #44

It goes up and down quite a bit from the numbers I’ve played with


((╯°□°)╯︵ ┻━┻) #45

When applying for a loan recently I found they all fluctuate drastically depending on how much you want to borrow. For example here is Santanders personal loan calculator and their APR is roughly as follows:

Up to £3K - 20% APR
£4 - £8k - 4% APR
£8k - £15k - 3% APR
£15k+ - 3.5% APR

https://www.santander.co.uk/info/personal-loans/open

I would assume that the more you want to borrow the cheaper it is but it’s not the case :man_shrugging:


#46

It’s pretty standard for bigger loans to have lower rates. I’d like to see loan providers telling you how much more you could get for the same ‘price’, as you just have to play around with the calculators at the mo