SafetyNet Credit review

If you granted it access to your current account transaction information, SafetyNet Credit would make a secure and ongoing connection to your bank account and use this connection to assess your credit and to track your balance, lending money when you needed it (hence the “safety net”) and taking repayments only when you could afford it.

Because it’s an open-ended and ongoing agreement, this is described as a revolving line of credit as opposed to a fixed-term loan.

Underlying this innovative approach, however, is high-cost short-term credit similar to typical payday lending with eye-watering interest rates and borrowing amounts.

When you applied for a credit facility through SafetyNet Credit, along with all the usual info you’d expect a lender ask for, SafetyNet Credit also asked for access to your bank account. That didn’t mean handing over your internet banking login details. Instead, it used open banking to access and analyse your account transaction data.

SafetyNet Credit used this visibility of your account, together with your credit history, to assess whether short-term credit would be affordable for you. Provided it is, SafetyNet Credit would then make a certain amount of credit available to you, which you could use at any time. You’d probably want to download the app to make this process easier, but alternatively, you could log in to your dashboard online. Whilst you borrowed, you’d pay a daily charge of 0.8% (that’s 80p per £100 per day).

Having that live connection to your bank account also meant that you could set up automatic borrowing for when your linked account dropped to a pre-agreed level. The purpose of this was to avoid going into unauthorised overdraft (exceeding your authorised overdraft limit) and incurring those harsh penalty fees. You’d want to look at your account’s overdraft rates and fees to weigh up the overdraft costs vs using SafetyNet Credit and the point at which to set the pre-agreed level for automatic deposits.

Repayments could be made manually at any time or would be taken automatically when money came into your account.

For new customers, the process of getting your credit line approved and in place would take up to 24 hours.

Once the facility was in place, drawing down funds took no more than 2 hours. In fact, it usually took less than 15 minutes.

Setting up the credit facility was free, and there were no ongoing maintenance costs. However, when you borrowed, you’d be charged 0.8% interest daily. That’s the maximum allowed by the Financial Conduct Authority (FCA). Interest was charged for a maximum of 40 days, so the most you could pay is £16 interest per £50 borrowed. Provided you made repayments on time, then interest was the only cost involved.

If you were borrowing £250 for 2 weeks, you’d pay £2 each day for 14 days, making a total of £28 in interest.

If you borrowed over a longer term, then you’d make monthly repayments. You’d be required to pay at least 5% of your outstanding balance at that point (which would include any interest you had accrued), or if that’s less than £20, you’d be required to pay £20. That’s just the minimum required payment, however. If you could repay more, then you should, as it would keep the overall cost of borrowing down.

Like the vast majority of lenders, SafetyNet Credit reported details of your repayments to credit reference agencies (CRAs). Provided you make all repayments in full and on time, using credit responsibly helps to build a positive credit history. By contrast, if you miss repayments, that’s also reported back and will have a negative impact on your credit record.

SafetyNet Credit would run a check of your credit record as part of the application process. This check would leave a footprint and cause a slight (and usually short-lived) negative effect on your credit score, so you shouldn’t apply for too many loans in a short time.

You could apply for a SafetyNet account if you had bad credit (your application would stand a better chance of approval if negative marks on your credit file were not recent).

Before the lender went into administration, SafetyNet Credit was regulated and authorised by the Financial Conduct Authority (FCA), so it was bound by the same rules and regulations as pretty much all reputable lenders in the UK (never borrow from a company that isn’t FCA-regulated and authorised – if in doubt, you can search its register).

SafetyNet Credit would request visibility of your transaction history through “read-only” access. It would ask applicants to hand over their internet banking logins to allow it to “scrape” transaction information with the help of a third-party company called Yodlee. Again, this wasn’t illegal, but it was questionable in that your bank probably wouldn’t approve of you sharing your login details. However, in 2019 Safety Net made the leap to open banking – which is arguably a much more legitimate approach.

Open Banking is a government-led initiative that banks have had to get on board with due to requirements issued by the Competition and Markets Authority (CMA). Open Banking boils down to banks being ready to share a customer’s transaction data with authorised third parties if the customer instructs them to do so. And “authorised third parties” means companies on the Open Banking Directory and regulated by the FCA or a European equivalent.

Crucially, though, the fact that SafetyNet Credit was safe is one thing. Whether it was a cost-effective choice is another. You should always shop around to get the best rate on a loan. Similarly, if you’d already signed up for a credit facility from SafetyNet Credit, you could terminate it at any time and seek better rates elsewhere.

SafetyNet Credit had done an impressive job of making it super-convenient and easy to regularly dip into its credit facility. The only problem? High-cost short-term credit wasn’t and still isn’t suitable for regular use.