Monzo is rolling out short-term loans to its 2.5 million customers as the challenger bank seeks to take on incumbents with a range of digital banking services.
The loans service - which is being launched after a nine-month trial with 4,000 customers - will not be targeting the typical ‘payday loans’ market, with lower interest rates than those charged by companies such as Wonga, which sometimes reached around 1,000 per cent APR.
Customers who are eligible for the loans can now borrow between £200 and £15,000 from Monzo for up to 60 months.
Rates range from 3.7 per cent APR representative on loans of £7,500 to £15,000 to 20.4 per cent APR representative on loans up to £7,500.
Monzo stated that it is seeking to ‘fix problems across the industry’ such as a lack of transparency and confusing terms and pricing. It will not charge early repayment fees for customers looking to settle their debt early and repayment dates can be changed to adapt to customers’ circumstances.
Monzo also said customer’s credit worthiness and the amount they can borrow would be assessed by matching financial data with information from credit agencies.
The company rolled out overdrafts of up to £1,000 to customers in April 2018.
Chief executive Tom Blomfield said: “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.
“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.”
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