Challenger bank Monzo rolled out a range of new loans today, as the digital bank ramps up its efforts to compete with its larger rivals on the high street.
The app-based group will charge interest rates starting at 3.7 per cent for loans higher than £7,500, climbing to a maximum of 24 per cent for smaller loans of at least £200.
“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 chief executive Tom Blomfield.
He added: “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.”
According to consumer group Which?, Monzo’s 3.7 per cent rate for higher amounts, while not the cheapest, “is certainly competitive”.
Which? said: “Borrowing £15,000, John Lewis Finance, Admiral, M&S Bank and Sainsbury’s Bank and Zopa all offer 2.9 per cent APR. But it’s important to note that you won’t actually know whether you’ll get that super-low rate until you make a full application, and only 51 per cent of people have to qualify for the advertised rate. With Monzo’s loan, you’ll know before you apply what rate you’ll get.”
Over the past nine months the firm has been offering loans to more and more of its customers.
Monzo’s move follows on from rival challenger bank Starling’s announcement last year that it was planning to offer personal loans.