Monzo Launches Range of New Loans
Challenger bank Monzo has launched a new range of personal loans in a bid to compete with its high street rivals.
Customers of the app-only bank can now borrow anything between £200 to £15,000. Loans can be taken out for up to 60 months for the maximum amount, and for as little as 90 days for the minimum amount.
The bank had previously launched overdrafts in April 2018, allowing current account customers to borrow up to £1,000 with a 50p charge per day. Interest rates for the new loans start at just 3.7% for loans above £7,500, but for smaller loans they are as high as 24%.
However, by offering such small loans it has been compared to payday loan companies such as Wonga which went bust last year. But Monzo has insisted that they are not targeting vulnerable customers or charging people exorbitant interest rates of up to 1,000% - something which payday lenders have been known to do.
“These aren’t targeted at the sub-prime end of the market at all,” said Tom Blomfield, founder and chief executive of Monzo. “You have to pass a relatively stringent credit check.”
The bank is using credit reference agency Transunion to see which of their customers are eligible for a loan, and customers can also see via the app what rate they would get before they even apply.
Monzo has been increasing in popularity in the UK since its launch in 2015 and is especially popular with younger generations and in the South East of England. It is believed that around 500,000 people will be eligible for the new loans, out of a total of 2.5 million customers.
“The unfortunate reality is that many lending products on the market catch customers out with hidden fees and jargon and they don’t offer much flexibility,” said Mr Blomfield. “That’s why we’ve worked hard to build a fair and transparent loan offering that gives customers control – this includes letting them decide when they make repayments and not penalising them for paying off their loan early.”