With short-term loans being increasingly scrutinised in recent years – particularly following Wonga's descent into administration back in August – we’ve seen a number of new brands aiming to do short-term loans differently – and, in most cases, more ethically.

One of the most innovative is Drafty, which is designed to be fast, flexible and affordable.

What is Drafty?

Rather than an overdraft or payday loan, Drafty offers lines of credit.

Credit lines are designed to be cheaper alternatives to payday loans and unsecured overdrafts, giving borrowers a more controlled and manageable approach to loan repayments.

Drafty won “Innovation of the Year” at the Consumer Credit Awards 2018. Its sister company, Lending Stream, offers short-term loans.

Gain Credit LLC, Drafty's parent company, is regulated by the Financial Conduct Authority (FCA).

How does Drafty work?

Drafty lets you borrow a line of credit between £200 and £3,000, depending on what you can afford.

Because you’re taking out a line of credit rather than a payday loan or overdraft, you can dip into the loan as and when you need it, and you only pay interest on the amount you’ve withdrawn from your credit line.

For example, let’s say you take out £3,000. This will sit in your Drafty account, waiting for you to withdraw it. If you take out £500, you’ll only have to make repayments on that £500, and only that £500 will build up interest. The other £2,500 doesn’t need to be repaid, and won’t accrue interest, until you withdraw it.

Drafty’s daily interest is 0.18% of the money you’ve withdrawn from your credit line, which is one of the lowest interest rates on the market for this kind of borrowing. Manage your credit line properly, and your repayments can be perfectly manageable, which makes it a far cry from the notion of the predatory short-term loan.

Like its payday loan sister company, Lending Stream, Drafty emphasises speed and ease of function. Once you’ve withdrawn money from your credit line - which can be done either through the website or app - it should arrive in your current account within 90 seconds. 

Drafty's users experience is impressive, which is a key concern for customers in this sector. Many of the newer, more ethical short-term loan companies - such as Sunny - have also been praised for their ease of application and clarity.

If you keep on top of your repayments, Drafty automatically offers you a higher maximum loan of £5,000. You get a notification when this happens, and it doesn't kick in unless you approve it within 30 days.

Making payments on your Drafty loan

Each month, you’ll make a minimum repayment on the amount you’ve withdrawn. It comes directly out of your bank account. The bigger the portion of your credit line you’ve withdrawn, the higher this minimum repayment will be.

Other than the minimum monthly repayment, paying back the money you borrowed is flexible. You can pay off more each month if it suits you, and you can pay off the whole loan early without any fees.

How do I apply for a Drafty line of credit?

You need to be 18, in regular employment, a UK bank account holder, and taking home at least £1,250 a month to get a loan with Drafty.

To get started, you have to answer a few questions, which will determine how much credit you’re offered. As well as personal information, such as your address and employer, this includes how much you spend on things like transport and food.

Drafty's drawbacks

Drafty is a great option – if you’re eligible. But because credit lines are only offered to people in regular employment who take home at least £1,250 with a debit card and bank account, many people won’t be eligible. You have to earn £17,000 per year to take home £1,250, assuming no other expenses like pensions or student loan repayments.

As contract-based and self-employed work becomes more popular, these eligibility criteria may seem increasingly rigid, and even outdated.

Loans like Drafty

Although Drafty’s approach is innovative, it’s not the only lender operating with this business model.

Drafty vs. Tappily

Tappily also offers lines of credit, with the maximum amount determined by what you can afford. The maximum you can borrow through is £2,500, which is less than the £3,000 maximum offered by Drafty.

What’s more, the interest rate is almost double that of Drafty: 0.34% compared 0.18%.

Nor is the process as quick: where Drafty promises that funds will be in your account within 90 seconds, Tappily can only guarantee it within 15 minutes.

In most ways, Drafty comes out as a better option, with lower interest rates, a more efficient process, and a higher maximum loan. But Tappily could be a great option for people on lower incomes, because although both lenders carry out rigorous affordability checks, There's also no minimum take-home salary - you just have to be able to prove you can afford the repayments.

But, because you need regular employment, even Tappily isn’t a great option for the self-employed.

For those who don’t meet the employment criteria for either Tappily or Drafty, there are a number of affordable short-term loan options.

Oakam and Sunny: lower-income alternatives to Drafty

The two highest-rated short-term loan providers on Smart Money People are Oakam and Sunny.

Sunny, for example, provides short-term loans of up to £2,500. To be eligible, you just need a net income of £500 every month, a UK bank account and a mobile phone.

Oakam Loans has similar eligibility criteria, except you only need an income of £400 per month. Oakam’s loans are particularly good for people with a bad credit history, who may struggle to get a loan elsewhere.

If you’ve used Drafty Loans, let us know what you think by leaving a review.