UK Edition
Monzo starts lending to customers, but how competitive are its personal loans?
App-only bank Monzo has launched its first range of personal loans, targeting customers who are alienated by the lack of transparency at high street providers.
The digital bank will charge customers interest rates of between 3.7pc and 6pc for loans of £7,500 to £15,000, rising to between 6pc and 20.4pc for loans of £200 to £7,499.
Loans of up to 60 months are available.
For comparison, rival providers John Lewis Finance, M&S Bank, Sainsbury's Bank, Tesco Bank and Zopa have a headline interest rate of 2.9pc for loans of £10,000.
Customers looking for a loan of £2,500 can access a best-buy rate of 13.2pc from Admiral, although rates from high street banks are typically higher.
There are some benefits to the Monzo loans, however. Customers have no early repayment charges if they wish to pay off their loan sooner than planned. Users can also change their repayment date and will not be charged if they are late with their monthly payments.
Borrowers will also be given a personalised interest rate before they apply. Many other banks perform a hard credit check on applicants, which can negatively affect their credit score. Monzo said this had deterred many people from applying for loans on the high street.
In June, Telegraph Money reported on the interest rate lottery many loan customers face.
A little-known loophole means that banks can advertise low rates while offering a significantly worse deal.
This is because rules only require 51pc of successful applicants to be offered the advertised interest rate. The remainder can be offered a worse deal or rejected altogether.