Let’s talk more about credit and at the right time 

If I go back 8-10 years many of our customers found out about Moneyline through housing associations, community organisations or friends and family – via trusted relationships. People were more aware of us in the community and came to us when they needed to spread the cost of a larger item or an unexpected bill. We saw less financial distress in those applying, even at a time when austerity was kicking in because they knew about us. Roll forward 10 years and we have closed all but one branch,  home credit has gone from many regions and so have other face to face credit options. This leaves people having to navigate the internet to find credit and even then it’s complicated as there are very few direct lenders for small cash loans. 

Credit as part of financial education 

Knowing how to look for credit and understanding whether it’s a good option can be confusing. Financial education is often focused on talking about the benefits of saving or better budgeting, not the benefits of credit on spreading costs and how to find the right product for you. We know our customers are great budgeters, you have to be when you don’t have enough income. What they need is help spreading the cost of bigger bills and making sure they have access to all the income they are entitled to. We need to be braver and start talking about credit as a part of the solution, then maybe people will have the confidence to look for a suitable credit product to help spread the cost of bigger purchases or unexpected costs before they get into financial distress.  

When we don’t talk about credit openly we miss the opportunity of sharing what actions people can take now to access more credit products in the future. Being transparent about what can lead to a no decision from a credit provider is something that isn’t shared very clearly and openly at the moment. It’s not just about a credit score as other things such as variable income, high cost credit taken out (even if you pay it), gambling and a lack of direct debits on your bank statements are often seen as negative financial indicators when credit providers make decisions. 

With a lack of focus on credit education we also lose the opportunity to explain the costs and what to look for in a credit product. In the first article we talked about the complexity of APR. For many, they simply need to know the total cost they will pay and what each payment will be, to see if they can afford it. If we talk about it more we can help explain some of the hidden costs to look out for and other things to consider as it’s not just about total price for everyone – it can be about payment frequency that fits with budgets, ability to repay early with no extra cost, flexibility if you miss a payment. We know that more people are going to illegal money lenders as a first choice as it’s seen as easier, with more chance of getting the cash. Telling people not to go to them won’t work on its own, we need to get more transparent and better at explaining the alternatives and give people the confidence to use credit, not make it seem like a bad thing. 

Earlier intervention rather than credit as a plaster for financial problems 

I had thought the reason Moneyline is now seeing more customers with financial distress is because those that apply online have worse credit, but what if it’s more to do with the fact that they are applying too late due to the issues discussed above?  

On internet searches we are lost among the aggregators, very high cost credit alternatives and promises of money in your account in five minutes. This can lead to people choosing based on internet tag lines rather than the best product fit. As a small not for profit we can’t compete with the technology and marketing spend and we don’t want to, we want to build relationships that help improve customers’ longer term financial resilience. 

We need to be in the place where our customers go to find information about money. When people they trust don’t talk about credit early it can make it feel like it’s a solution for when things go wrong, not a way to help manage your money before things go wrong. I often hear people referring to small-sum credit as ‘debt’ but larger amounts as ‘credit’ – we need to change that narrative. 

The fact that most credit is now only available online makes this journey harder for many as while they may have a mobile phone, many don’t use it to buy things due to a lack of trust. We need to make access easier. If we can get credit to be talked about as part of the solution by trusted partners, can we offer credit to more people as part of a rounded solution before they get into financial distress? I believe so.  

The signposting and partnership opportunities reduced for Moneyline as we raised our APR% to try and stay open to continue to serve our customer. I want to see housing associations, advice services, trusted community groups and banks signposting their customers to all the services that can help them, including credit options. We know that many organisations do signpost to Credit Unions but they are only part of the solution, with their cap on APR limiting their ability to lend to higher risk customers. Customers also need awareness of more than one option so that they can have choice and pick the most suitable product for them. If organisations won’t signpost to social-purpose lenders like Moneyline, there’s a risk that people will keep turning to illegal lenders. The BBC and newspapers like the Express, Mail, Guardian and Financial Times have highlighted community lenders like Moneyline; housing associations, community organisations, advice services and banks should too.