Banking Without Borders
00:13:24 · Jonny Pease, Jan Watermann
[00:13:24] S0: That's something that's something about these loans, isn't it? Like the marketing side of it, Jan, right? There shouldn't be marketing mechanics behind this. It should just be this is the rate. This is like don't like don't take this out. It should be like, don't take this out. [00:13:39] S1: Not not quite sure if this is the bank's fault, though, Jonny, because those are institutions that are yeah, interested in making as much profit as possible. Um, they're not charities. It's just in their nature to do whatever it takes to earn as much money as they possibly can. It's up to the regulator, right? The regulator can restrict what they are allowed to say and what they're not allowed to say. And if they say um this is how the representative APR works, there you go. Then the bank does exactly that. If I had a bank, I'd probably do the same. And if it works in my favor, even better.
00:14:12 · Jonny Pease
[00:14:12] S0: Yeah, I wonder how this makes people feel about the recent increase in the bank surcharge or the bank corporation tax. Yeah, you might not be aware of this, but in the most recent UK budget, John Healy, the Chancellor of the Exchequer, has increased the corporation tax on banks for a temporary period of time by 3%. I think it's going to apply for 15 months, interestingly, because they've been super profitable. And I feel like the more I hear about these kind of predatory tactics from banks, which you're right to say, like they they are very heavily regulated. So they're just playing in a in a space where they are allowed to play. I don't feel sorry for them at all because they have to pay an extra 3% in tax. I'd be curious to hear what people have to say about that in the comments section. Some people might say, hey, that 3% is only going to get transferred on to the customer in maybe more expensive loans. You know, the APR might go up as a result of that 3%. That's possible as well. Like mortgage rates could go up. Um, but it makes me feel, yeah, I don't feel sorry for them at all. Especially, you know, one thing I've got to say about Revolut and uh Monzo, and I think nationwide, I think Jan already mentioned this regarding Revolut. They don't charge you to sell your loan early, which I I really like, Jan, because even if you work hard to pay off your personal loan, you budget really well, and you want to get rid of it sooner rather than later and pay less interest, you're still charged for that.
00:15:25 · Jan Watermann, Jonny Pease
[00:15:25] S1: Yeah, that's the thing. I mean, it makes sense again, it makes sense from a uh from a commercial perspective, right? It's um that's interest they've they've calculated to receive, you know. Um maybe, I mean, these these banks, they certainly have shareholders that want to be notified on expected earnings. You know, maybe that has already been communicated to them. So it's it's something that the bank expects to receive. And then if all of a sudden, you know, a lot of customers pay back their loans early, the money isn't coming in anymore. So there needs to be some sort of uh compensation for that. I understand it, but still it's it's kind of harsh because the people taking out these loans, you know, potentially paying double-digit interest rates, those are not the people that have the money to to pay a penalty easily, right? Typically, you know? Yeah. Maybe the exceptions, but I'd say the the average user taking out this kind of loan, I don't think they'll be able to pay that back easily. [00:16:20] S0: I mean, the law does say though, you know, you are allowed to pay off a loan early, but yeah, the bank can charge you up to two months of extra interest and they can charge you a fee for a loan repayment, I think anywhere above eight thousand pounds. So I think the first eight thousand pounds of any repayment yen is fee-free. And then there may be a fee of I think as I think it's capped at one percent. [00:16:41] S1: Right.
00:16:41 · Jan Watermann, Jonny Pease
[00:16:41] S1: Right. [00:16:41] S0: So it's not gonna be exceptional, um, but there is, yeah, there could potentially be fees to pay. Shall we discuss you know what the alternatives are? You know, we've kind of poo-pooed personal loans quite heavily, and I I I think, you know, I wouldn't want people to think there is no answer, you know, to debt. I mean, I I I definitely don't think people should be taking on debt to make a purchase that they can't necessarily afford. But if you have existing debt, you know, there has to be answers on how you service that. [00:17:13] S1: What's the most efficient way to deal with it? A credit card, potentially, right? A credit card that um offers 0% of interest in the first year. Um, they're plenty on the market. If you qualify for them, maybe that's a good solution.
00:17:24 · Jonny Pease
[00:17:24] S0: You're talking about like a 0% purchase card, right? Like there is gonna be some limitations on how much you're gonna be enabled to borrow. Maybe that's a good thing. You know, that's not gonna pay off necessarily an existing debt. But if you are someone that's being very tempted by a purchase, yeah, this is the way to go with it, right, Jan. I mean, I know I know what you're gonna say. You're gonna say don't do it, but let's just let's just consider human psychology for a moment. Like human beings, we are incredibly weak-minded creatures, and I appreciate that you have to just appreciate for for a moment that some people are really pressured by like social conformity, like you know, Instagram, TikTok, all of these things just coming at them all the time, and they're thinking, I want to try to at least I don't know, show a life that maybe I cannot afford, but people will think I have. I'm not condoning that, but like don't do a personal loan to fund that. Your best bet is doing if there's something you really have to buy is a 0% purchase card, like Jan mentioned. TSB Platinum, for example, are offering 0% up to 26 months, up to Yan. That should be stressed though, because that, you know, depending on your eligibility, that might change. I'm just gonna say it, mate. I don't think it's good advice, but I'm gonna say it look, if you want to buy something, you'd use that card, and then over the course of the 24, 26 months, however long you get, you'd have a strict budget in place and you'd have a direct debit and you'd be paying that purchase off every month. All right. And never, yeah, and just last thing I'm gonna say, never go beyond the promotional 0% period, because after that, the fees may. I think TSB are 24.95% after that 26 month window or whatever window you get.
00:19:00 · Jan Watermann, Jonny Pease
[00:19:00] S1: Yeah, 24.95%, still less than what you can get with some personal loans if you're unlucky, right? If your credit score just doesn't allow for it. Um yeah. [00:19:10] S0: That's true. Fascinating, isn't it? That's true, isn't it? In fact, who were the worst, worst offenders? Was it Zopa? [00:19:17] S1: I think Tesco was was the highest I found. What was that? 30 four percent. [00:19:24] S0: 34.5. [00:19:25] S1: 34.5%. Wow. Festival. [00:19:28] S0: You know what? Anybody in the comments that has a personal experience of personal loans, I'd love to hear from you. I really hope that you know it didn't cause you any hardship, but I think your experience could be really useful for the comments section for people to read about. Um, I'm sure some people will be watching this who are considering taking out a personal loan. Like what rate did you get? How did you did you get it paid up okay? Did you end up paying more interest than you anticipated? What was the experience like? You know, what was the lender like? [00:19:54] S1: Yeah, besides that, other options. Money transfer cards, that could be a good alternative, and uh balance transfer cards potentially, right?