Banking challenger Chetwood builds the world’s first dynamic loan as fintech startups look on

Welsh banking challenger Chetwood Financial has today unveiled the world’s first so-called dynamic loan, where the interest rate falls as borrowers improve their credit score.

Built in collaboration with credit rating firm Clearscore and launched under its brand Livelend, the loan uses technology to monitor a customer’s credit score and reduce its rate at three-month intervals as the risk of the loan improves.

The product will cater to those excluded from the financial industry by the collapse of pay-day lenders such as Wonga, which often served those who couldn’t qualify for products due to bad credit history.

The fintech firm has beat several rivals to the punch, including the likes of Monzo and Starling Bank, who said they were considering similar products this week.

Starling chief executive Anne Boden told City PM that while it had no intention of entering the market any time soon, “we are conscious that there is a demand for loans from people with affordability issues”.

“It’s an under-served market. We are constantly looking for innovative technological solutions to problems such as these,” she added.

In July, JP Morgan chief executive Jamie Dimon told Business Insider that the investment bank was also developing ways to reward customers for boosting their credit scores. The firm was said to be commencing the testing of several tools in the coming months, focused on helping consumers improve their financial health.

“We are really excited to bring this fairer form of credit to our users,” said Justin Basini, chief of Clearscore. “This innovation will give even more people access to cost-effective credit.”