Why we’re lending


(Andy) #91

Turning off lending promotions on settings seems to turn off the messaging prompts. I assume there’s a min amount but no idea what it is!

Discourse now auto removes quotes where the post directly follows the quoted post


#92

Good to know (on both accounts!)

I’m relatively indifferent to the “lending promo messages” that first Starling, and now Monzo have adopted (the Starling forum was very against them).

The only thing I find a little odd is that someone would decide to buy something on their DEBIT card (not credit), and then convert to a loan after the fact… I mean, if you can afford to buy it on your debit card, why would you then want to spread it over X amount of months and pay the interest?

I can certainly see why a lot of people considered it irresponsible marketing/lending.

I’m sure there will be a few cases where an unexpected financial situation arises, and someone will need to convert a recent large purchase into a loan - But I’d guess that those situations are thin on the ground!


(Alex Sherwood) #93

I guess the clue’s in the name - you’re spreading the cost, rather than taking a ‘big hit’ to your finances up front. But a) the rate will be different than a credit card’s & b) you’re committing to paying off the debt, rather than potentially digging yourself into a hole long term. Lastly, not everyone has access to a credit card.

Why?

I don’t think that, that’s the use case that these loans are designed for at all tbh.


#94

If you wanted to do that, why wouldn’t you sort out the loan prior to the purchase?

Perhaps the functionality was unknown to the user, but the wording, and general concept feels very reactionary, rather than proactive.

You are also committing to paying off more than you would if you simply bought it outright - The fact you can buy it outright in the first instances should mean that you can afford whatever it is.

If you can’t afford it, and need to spread the payments, there are much better rates for an organised loan, rather than having to convert your recent purchase into a loan through Monzo.

Why do some people consider it irresponsible? Because you are encouraging someone to pay interest on a purchase that has already been made in full - If that person can’t afford the purchase in the first place, should they have purchased it in the first place?

If it’s planned, you have loans designed for these kind of things (house repairs etc), which offer better rates.

If it’s unplanned, and a last minute emergency, I can see a potential use case here - Although I’d still be concerned that the person would have to take a loan out for whatever the last minute emergency is - Unless they are very good with their finances, it’s a slippery slope to go down.

Like I said, just because I can’t think of a use case (or can’t think of many), it doesn’t mean they won’t exist - Especially in the hypothetical world of the internet :wink:

What examples can you think of where this would be the best way to go?

I’ll add - I’m merely repeating previous concerns that have been raised - I don’t subscribe to the “nanny state” of making sure no one makes any mistakes ever - People are free to do as they please.

I just personally don’t understand why someone would want to “spread the cost” of something they have bought outright on a debit card, when there are seemingly much better options out there (pre determined loan at a significantly lower interest rate, or credit card spring to mind).

If this hypothetical person can’t get the loan or credit card, chances are Monzo (with their strict lending criteria), are not going to offer the loan anyway.

If Monzo do offer the loan, then is it designed for people who can’t get a decent credit card or loan? Is it catering for those with worse credit records (something I know Tom is keen to “disrupt”)?

If so, fair enough - As long as the option to turn off the wording on the notification exists, I couldn’t care less :smiley:


(Alex Sherwood) #95

Because it’s more convenient to do it this way &/or you decide that you’d rather spread the cost, instead of taking the hit up front etc?

I don’t think you need to worry about people being capable of making a decision about whether those interest payments are a good idea of not. Monzo explains the payment schedule clearly & enables users to manage it easily.

This is literally one of the main use cases for credit.

Discussing this seems like a bit of a waste of time then.

No it’s not.


#96

I just think this screams of bad financial planning, or little to no other option - Neither are great scenarios to be in, and whilst it may not be anyone’s fault, there is no getting around that the Monzo option is more expensive (and for people in a tight spot, might not be the best option).

Explaining something clearly does not mean it’s the best thing for the customer (see overdraft fees for reference - Appreciate different customers prefer different things).

Main uses for pre approved credit (through a credit card or loan) - Not an afterthought.

Considering you haven’t actually given examples of how you see it working, and just seem intent on disagreeing with me, I’d agree with you :smiley:

Care to elaborate? Who is it designed for then?

Oh, and again - If you can think of any actual examples where this would be the best solution - I’d love to hear it (out of genuine interest, because I can’t personally think of any).

:+1:


(Only available in amateur ) #97

It’s great that you have such low cost lending options, a lot of people don’t

It would’ve useful for people who need to make a large purchase which they have the funds to cover, but don’t want to use all their safety net if possible. Yes you can apply for a loan up front but this way you don’t need to apply, it’s just there afterwards if you qualify


#98

A scenario to think of, a person needs to buy a new appliance after saving for considerable time. The cost is a spend they need to buy, but didn’t think of taking out finance, as may well impact the credit score or offer very high rates. Person now doesn’t have the emergency fund saved because of the buy. Something happens and money needed, payday loan being considered, but instead monzo allows them to spread the cost at lower rate, no application forms and a much better plan


#99

Would a Monzo loan not be reported on your credit file then?


#100

You wouldn’t be going through another search on your credit file and possible decline, it’s only showing in app because you’ve met eligibility. Also a lot of people without a shiney score have to make multiple applications before getting accepted, which does just as much damage, as lenders refuse after 3/4 applications in last X months.


#101

I don’t tend to borrow at all (montage and car aside) - If I have to go through a few months of pain to save and buy something, I will.

The flip side of this is you are assuming that everyone has an understanding of their finances, and the implications of taking a loan.

Sadly, we are not all as savvy as yourself, and those on the forum who share an interest in the subject, and I’ve seen many friends get into debt because taking out the loan was the easy option.

So yeah, the fact that Monzo make it so easy is a blessing and a curse.


(Andy) #102

I often use klarna pay and it just shows as a soft check as long as it’s paid by the due date.

when I want to use PayPal credit for spread the cost it just shows as a standard revolving credit line the same as next and very credit does. My expectation is that Monzo should appear as this as well


(Neil M) #103

I think maybe the focus for Monzo should be to look at those with a poor credit and ask the question is the reason why you have a poor credit record because you couldn’t actually afford a loan 1235% but you could have afforded a much lower loan. If the answer is that they could have afforded a loan, then if anything there is a gap in the market for affordable pay day loans


(Only available in amateur ) #104

The screenshots of the loan show exactly how much it’ll cost, there’s no ambiguity there at all. If people have the right information they are able to make the right choices


(Alex Sherwood) #105

They only make it easy for someone who’s a good candidate to receive credit. As you know, since you spend so much time in this forum, Monzo’s lending criteria is very conservative, hence all of the complaints in this topic Loans (old thread). Which also tells you that this isn’t a product for people with poor credit histories..

There’s more about this here -


#106

I said the very same a few replies ago.

Which undoes the arguments of people who are struggling to get good credit elsewhere (in my opinion).

Which kind of brings me back full circle to those people who are offered this Monzo product (assuming the lending criteria is as strict as the rest of the Monzo product line up) - Why would these people (those who are clearly not struggling to afford a kitchen appliance or anything else), opt for the Monzo spread the cost option?

You seem to be agreeing that a “good candidate” would be someone who has the ability to take out a low interest credit card, or a pre approved loan, so the only thing I can think of is they planned the purchase very poorly, or it was a very unexpected large necessary purchase, that they can’t cover using other payment methods…

Purely curious at this point, but as it’s all hypothetical, I’ll wait until someone comes along whose actually used it - Rather than imagining a potential scenario.


(https://youtu.be/5DmYLrxR0Y8) #107

Good credit doesn’t mean you have plenty of spare money.

Source: Me.

I have excellent credit but very little spare cash.


(Only available in amateur ) #108

I think it’s clear by your replies both on this thread and on the locked pots thread that you find it hard to envisage any scenario where someone needs credit or a facility to save money and not be able to touch it. That’s fine, you clearly have control over your finances that the vast majority don’t. Your refusal to acknowledge any explanation as anything other than an example of other people not managing their money as well as you means I’m not sure what you’re after.
A good candidate to Monzo isn’t the same as a good candidate for other lenders


(Alex Sherwood) #109

I used it to pay off part of my overdraft that I’ve had for a long time with one of the high street banks, since the rate was lower. And also to spread the cost of a recent large purchase.

Knowing that I was likely to be approved, it would be easier to manage the loan & the fact that it was simple to take out were also factors in choosing to borrow from Monzo.

That seems like a pretty valid use case to me, rather than ‘irresponsible lending’.


#110

I struggle to understand why someone would buy something with their debit card, and then chose to pay more for it by financing it at a later date.

Given that we’ve established that these customers are likely to be approved for decent credit lines elsewhere, it seems extremely wasteful :man_shrugging:

The locked pots thread is completely different, so not sure why that’s been mentioned?

It’s my opinion, but it feels like anyone could come up with a scenario to support an idea - Despite how rare that scenario might be.

The supporting “arguments” seem flawed, but everyone is entitled to their opinion.

Have you not looked into other bank providers with much lower interest rates? As someone as financially savvy as yourself, it seems a bit crazy that you’d be happy to pay back more, just because it’s Monzo?

Perhaps I’m alone in my thinking, but I’d rather use the best (and cheapest) product for my needs at any given time.