Digital bank Monzo considers offering high-cost loans

Posted: 26 November 2018 3:53 pm

Latest move by Monzo is first public exploration of payday loans by major challengers

Digital challenger bank Monzo has revealed it’s considering offering high-cost loans to consumers who struggle to get credit, it’s reported today.

CEO Tom Blomfield told The Telegraph that there have been conversations with the board about the possibility of offering loans to people with a poor credit score.

The feature has not been developed yet, but Blomfield believes that the service can be profitable and “do well” by customers at the same time.

Monzo’s rivals currently provide other types of loan. Revolut has been offering peer-to-peer loans since March 2017 and is now applying for a European banking licence, which would allow it to bring loans in-house, while Starling Bank launched its first personal loan product in August.

See Finder’s review of Monzo vs Revolut vs Starling Bank.

Consumers with a poor credit score can find it impossible to access mainstream loans and typically end up using payday loan companies to borrow at extremely high interest rates. For example, if you borrow £200 for one month, several payday lenders will have you repay almost £250.

It’s estimated that about 3 million people use payday loans, also known as “high-cost, short term credit”. This type of loan is intended to cover emergencies, not long-term or regular costs.

In October, the chancellor, Philip Hammond, unveiled a government plan to offer an alternative through an interest-free loan scheme.

Monzo is gradually entering the loans business. The digital bank currently offers arranged overdrafts to its customers and has just started testing loans with a few hundreds of them.

Customers that have been selected for the test receive a message in the app and can borrow between £200 and £1000, to be paid back in 3, 6, 9 or 12 months.

Monzo says it is committed to supporting people who are having trouble repaying loans, allowing them to “take a break” from the payments and to come up with a “reasonable repayment plan”.

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site