Short term loans


#1

Just been thinking about some of the things on the roadmap, particularly the “short term loan” whereby you can split a large purchase into monthly payments.

In terms of your credit file, would this appear as a short term loan, similar to some of these pay day lending companies? Most short term loans have a negative impact on your credit score.

It’s not really something that interests me though I realise it may be of benefit to some people. Surely a credit card is an existing solution to this problem?

Seems like an odd thing for Starling to prioritise when there are so many other features that customers are crying out for :thinking:


#2

I would say not. Some people are rejected for credit cards where they can just spend the credit line on anything, due to poor credit record, no credit record, or low income, whereas they find it easier to obtain a small loan for a specified purpose.

if someone on minimal wage has a one off expense like replacing a fridge freezer or a washer dryer, obtaining a small loan from Starling would be a great solution for them.


#3

As I said, I understand there will be people who have use for this service. I would be interested how it would impact someone’s perceived credit-worthiness though. The various credit reference agencies all include a section on the report dedicated to short term loans.


#4

Starling short term loan for a emergency purchase if your on limited funds could be a good idea. But I guess it depends on the APR and how the credit scoring is done.


#5

This was the most interesting thing I noticed in the road map. Will be interesting to see how it works.


#6

Don’t get me wrong, I do think it’s an interesting prospect. It’s just surprising as I’m sure I’ve read on here that Starling credit cards and other such products were ruled out as the focus is purely on being the best current account.

Maybe a product like this will help them become the best current account by differentiating them from other banks? It does mean that some of the other things, like joint accounts, under 18s accounts, round ups, etc. will be further down the priority list.

I guess it’s just not something I expected to see prioritised at this early stage. Will be interesting to see how it pans out.


#7

If…IF…the Apr is competitive, this could potentially be good for things like Car Insurance…where companies charge a highish Apr if you choose monthly instead of annual.


#8

I can’t even get a small overdraft if I wanted one with any bank I’ve ever been with. (Luckily I’ve never needed or wanted one.)

I have a good income and never defaulted on any payment, I think the fact I’ve never had a credit card is the key?

What REALLY annoyed me is the last legacy bank would offer no overdraft and made a point of it; yet happily would offer a credit card with a limit of over two grand!


#9

@anne mentioned on an interview that starling was exclusively funded from overdrafts. short term loans are the natural extension to that.


#10

Any update on when this is coming? I wouldn’t mind seeing more info on how it will work…

And what sort of APR you’d be looking at…


#11

I think this is a really interesting proposition, obviously makes business sense for Starling as it’s another way of monetising accounts but also a differentiating product.

As has been said this would be of interest for things like car insurance where companies are quite happy to charge excessive amounts in order to pay monthly. I can see this being used a lot for holidays too, split the cost across 3 months for example…


#12

Brilliant use case! I always put my car insurance on a credit card and then setup a monthly standing order to pay it off, but this would be much cleaner and more convenient.


#13

specially for business accounts this would be amazing. I’m don’t mind paying up to 2% per month for some quick and easy cash :wink: