Drafty Loans – Overview And Alternatives
What is Drafty?
Drafty markets itself as an alternative to overdrafts, credit cards or loans.
With a normal loan, you are given a set amount that you must pay back with fixed repayments over an agreed period. With Drafty, you are instead given a credit facility with an agreed credit limit. You can then access funds up to that limit.
When you pay some off you can then borrow up to the credit limit again without having to reapply. The idea is for Drafty to give its customers the borrowing flexibility you get with a credit card or overdraft.
Is Drafty a legitimate company?
Yes, Drafty has been established for several years and is authorised and regulated by the Financial Conduct Authority (FCA).
It has positive reviews on Trustpilot with a rating of ‘Excellent’ as of August 2022.
How much can you borrow with Drafty?
With Drafty, you can initially borrow up to £3,000. However, it may be possible to increase this up to a maximum of £5,000 if you meet the necessary criteria and manage your account well.
Who can apply?
To apply for a loan with Drafty you must be a UK resident aged 18 or over and in a job with a salary of at least £1,250 per month. You also need to have a bank account and debit card.
How does a Drafty loan work?
Loan applications are made online through the company’s website.
If you’re approved, Drafty provides you with a credit line up to a specified limit. The limit provided will depend on your personal circumstances. Once your credit line has been approved, you can draw on the available funds through the website or mobile app. Drafty claims to send the cash to your bank account within 90 seconds.
How are repayments made to a Drafty loan?
A big difference with Drafty is that there is no set schedule to repay your loan. For the repayments, it works more like a credit card and you just need to make at least a minimum repayment each month.
The minimum amount you must pay each month is:
- 2% or 3% of your monthly statement balance plus the monthly interest on that balance; or
- £50 if that is higher.
If you have less than a £50 balance, you only need to pay what is left.
Some older loans with Drafty have different repayment terms.
Once you have paid off your full balance you can either close your account or keep it open. If you keep it open, there is the option of borrowing again. Providing there is no balance on your account you won’t pay interest.
What interest do they charge?
You pay interest based on the balance you have on your account each day. Interest rates may vary but, at the time of writing, the representative example is 0.18% of the balance each day. The APR is 89.70%. APR stands for Annual Percentage Rate and is the total cost of your borrowing over a year, including interest and other charges.
With this rate, if you had a loan of £1,200 for a year, you would have to pay back £1,627.05 in total.
Can you manage a Drafty loan online?
You can manage a Drafty loan on the company’s website or through the Drafty app. Once your credit line has been approved, you can draw on the available funds through the website or app. Drafty claims to send the cash to your bank account within 90 seconds.
Drafty also has a contact centre that can be reached on 0203 695 8072.
Are there alternatives to a Drafty Loan?
Drafty offers a flexible line of credit to people who might not be able to get that from mainstream lenders. The interest rate you pay may therefore be higher than advertised elsewhere.
There are a number of other specialist lenders who also provide loans to people who find it hard to access credit from traditional banks.
Little Loans offers customers a broker service to assist customers in finding flexible, transparent loans from a range of specialist UK lenders for amounts ranging from £100 to £10,000. You can apply online for an instant decision and, once approved, your cash can be sent to your bank account within minutes.
The Little Loans free loan eligibility checker allows you to see whether you are likely to be accepted before you apply, without affecting your credit score.
Representative Example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28. Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. We’re a fully regulated and authorised credit broker and not a lender