Halifax has brought it’s ‘loan with a twist’ offer back and I don’t think it’s okay. The bank is going to pick 30 customers at random when they take out a loan worth between £1,000 and £50,000 before February 7th this year.
Those customers will have their debt to the bank paid off entirely. Halifax ran a similar promotion last year and cleared £720,000-worth of winners’ personal loans.
I find this really problematic. I think it’s inappropriate to make borrowing feel like a way to gamble and that gamifying debt this way risks trivialising it.
Worst of all, I think that offers like this encourage people to take on debt in a hurry, to take on more debt than they otherwise would and to take on debt full stop.
So here’s why I think this loan with a twist is not the right way to sell credit.
The time limit is a problem
One of the problems I have with this offer is that it is time-limited. In order to be in with a chance of being one of the 30 lucky customers who could have their debt written off, you have to apply before 7 February 2018.
I don’t think it’s okay to add a time pressure to someone considering a loan.
Credit is a serious decision; it’s not something that you should feel rushed into. Only by thinking it through carefully can you be sure a loan is the right route for you. That can take time.
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It focuses the customer on the wrong thing
Now I’m not opposed to debt. It can be useful, it can be essential. But when you’re looking for the best deal you need to look at the numbers and nothing else.
How much will the borrowing cost you? How much interest will you pay overall? Are there any charges if you clear the debt early? Is this the best deal on the market?
These financial questions are the only things customers should be considering; it’s wildly inappropriate to add a game to the equation, which might encourage a borrower to take on a debt that will cost them more than others on the market.
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It gamifies debt
While I don’t often do it, I do like to gamble. Very small-scale stuff; I like lottery tickets and those coin-dozer machines in arcades (do they count?).
I can see how attractive a flutter can be, which is one of the reasons I only rarely let myself do it.
So it feels completely inappropriate to add that attraction, that gamification, that feeling of fluttery excitement to a credit product.
It could encourage you to borrow more
Perhaps you’ve decided a loan is the right answer for you. However, then you have to decide how much to borrow.
I believe that if you know there is a chance your loan will be cleared, you’re more likely to borrow at the higher end of your budget.
After all, the prospect that it will be written off is surely an encouragement to borrow more, so that if you are one of the 30 winners you get the maximum benefit.
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The whole concept is a problem
When I was a student (which is now a horribly long time ago) (don’t you dare ask how long), banks would stalk the freshers’ fair, offering gimmicks to encourage undergrads to take on debt.
To encourage us to sign up for a student credit card, we’d be offered popcorn machines and toastie-makers. These would be the main focus of the advertising, with bubbly sales teams making the most of the pile of boxes.
Yes, we would then be told about APRs and so on, but how many 18-year-olds really think about that kind of detail? It’s not as easy to understand as the popcorn machine you want to get home and switch on.
Post-crash, a lot of that kind of irresponsible marketing has come to a halt and it’s generally frowned upon to be too positive about credit, it has to be discussed more seriously.
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For example, in 2016, Sainsbury’s was rapped by the Advertising Standards Authority for ‘trivialising’ credit cards, after it featured a real-life couple talking about using a credit card to help pay for their home renovation.
The couple said things like: “You got a bit over-excited” and “We kind of went in head-first really,” which the ASA said meant they had not fully considered the consequences of the work. The ad’s tagline was: “It’s never just money, it’s freedom. Credit cards from Sainsbury’s Bank.”
In its ruling, the ASA said that the advert trivialised the process of taking out credit.
The cases, of course, are not exactly comparable and there’s certainly been no suggestion that Halifax is in any way breaking advertising and promotional rules.
However, I worry that loan offers like this, which include a suggestion of gambling, could also trivialise debt for some would-be borrowers.
So how should loans be marketed?
Clearly, the Halifax offer is simply an extra perk for most people and, for a handful, a stunningly surprising write-off of their debt.
But it’s important to remember that it’s a marketing tactic and that marketing simply exists to sell more of the product.
So it seems very likely to me that this promotion must be helping the bank sell more loans; they ran the same offer last year as well and they decided to do so again.
I think advertising and other marketing for loans, or any credit product should be based around the APR being offered.
Really the only appropriate marketing ‘gimmick’ for something as serious as debt is to lower the interest rate being charged or perhaps to offer an interest-free period on a credit card or similar.
All perks should directly benefit the borrower’s finances, not entice them with irrelevant perks.
Only a handful of Halifax customers will have their loans repaid under this offer. Selling credit cards with popcorn machines was problematic and trivialised debt, but at least everyone got one.
What do you think? Is it a harmless perk or does it trivialise or even promote debt? Have your say using the comments below.