New ethical lender ‘Creditspring’ launches today to offer people across the UK a low cost, simpler solution to their unexpected short term borrowing needs. For the cost of two coffees a month (£6), Creditspring’s customers can borrow £250 twice a year, repaying each loan over up to 4 months, without any interest being charged.
Creditspring is thus a new kind of financial safety net, with a crystal clear cost and benefit, which should prove attractive to the millions of British adults with virtually no savings to fall back on.
This reimagining of credit – without the need to charge interest or carry out underwriting when the loan is needed – offers a much simpler approach that is also better value than most overdrafts, credit cards or payday loans and free of any risk of the customer’s debt spiralling out of control.
Neil Kadagathur, cofounder and CEO of Creditspring said, “Credit in this country is broken. 40% of people in Britain – more than 17 million adults – have no financial safety net, yet the products they have to fall back on range from the complex and expensive to the downright toxic and financially disastrous. It is immoral that just when the consumer is on their back foot financially, the industry – from major high street banks through to the shoddiest of payday lenders – chooses to inflict their most outrageous charges for the privilege of being pushed into financial quicksand.”
“So we put our minds to inventing a radically better solution designed specifically to provide financial protection against the unexpected. We set 3 pivotal goals to make sure it was a revolutionary improvement on what people have available now. It must be really simple and easy to use, it must be excellent value and it must avoid any risk of fuelling spiralling debt.
“We’re proud of the resulting Creditspring product and we are excited today to make it available to people all over the UK. Our customers will enjoy greater peace of mind and lower financial stress, along with a new layer of protection from the dangers – overt and hidden – lurking in the product sector we are disrupting.”
Creditspring is available online to anyone age 18 or older, subject to eligibility. Anyone interested should visit the website, and fill in the simple and brief online application. They will then be told if they are eligible for membership and will set up an online direct debit for the monthly charge of £6. The ability to borrow will start 14 days after they become a member, which is also when the first monthly payment is taken.
From that date, the customer can borrow £250 from Creditspring up to twice within the first 12 months by making a simple online request when the money is needed. The cash is paid directly into the customer’s bank account within 24 hours. Loan repayments are then due (taken automatically via direct debit) each month for 4 months, repaying the full loan by the 4th payment. No interest charge is payable.
As research has proven that debt repayments of more than 5% of a person’s monthly income are likely to create affordability issues, Creditspring is limited to those with an annual income of £20,000 or more. This ensures that no single month’s repayment will be more than £68.50 (£62.50 + £6), a figure less than 5% of the net monthly income of any customer.
The typical product options for people with no savings to fall back on should unexpected costs arise are unarranged overdrafts, credit cards, personal loans and payday loans. Each of these has major drawbacks, including complexity, high costs and the risk of spiralling debt.
In contrast, Creditspring offers crucial advantages, thanks to its innovative re-imagining of how short term borrowing can work:
Customers have the peace of mind and lack of stress of knowing the money is readily available, without any risk of being turned down by underwriting when the need for money arises, or needing to consider more complex products with opaque high charges, just when they are desperate for the money.
Perhaps most significantly, Creditspring removes any risk of its customers falling into the toxic trap of spiralling debt. With each of the existing product alternatives, the high (and often hidden) interest rates and fees charged can suck the customer into ever increasing amounts of personal debt. This is a huge problem in the UK and one that the FCA is actively considering further measures to address.
The website is available at www.Creditspring.co.
Creditspring is authorised and regulated by the Financial Conduct Authority and is based in London.