The app offers a salary advance of £ 300
A new app gives salaried workers early access to funds on their next payday, with no fees or interest.
Borofree, which was launched a few months ago, aims to solve the UK debt problem. Users can get up to £ 300 upfront on their next salary.
However, you can only use it if your employer is registered, and the funds can only be used to purchase vouchers at participating retailers.
Here, which one? takes a look at what Borofree’s payday advance feature offers and how it compares to other services that help bridge the payday gap.
How does Borofree work?
By signing up for the Borofree app, you can get a salary advance of up to £ 300 per month. You will not be charged any fees or interest on what you spend. But the service comes with a few caveats.
First of all, your employer must be registered with Borofree (the service is also free for them).
If your employer signs up, then you need to arrange for your salary to go directly to Borofree. That’s because, on payday, Borofree will take back any advance you’ve had since your last payday, before transferring what’s left of your paycheck to your regular bank account – a process that he says doesn’t take only a few seconds.
The £ 300 advance is not available in cash. Instead, it should be used to purchase vouchers from participating retailers. There are currently 50 retailers available, including Amazon, Asda, Asos, Costa, Pizza Express, and Sainsbury’s.
The minimum spend, the options to spend in store or online and the validity period of the vouchers depend on the terms and conditions of each retailer.
How much money will you get?
The maximum amount that users can borrow before payday is £ 300, but not everyone will get that much. Borofree says he bases the advance on the amount you earn – so up to £ 300 or 30% of the income you receive from your employer.
To get the full £ 300 you will need to earn at least £ 1,000 per month after your employer deducts taxes, occupational pension contributions and any other payments.
If you get paid bi-monthly or weekly, Borofree says you can still use the program but your voucher allowance will be adjusted accordingly. So, if you get paid weekly, you will receive a new, smaller voucher allowance each week.
Borofree says you can use the allowance anytime before your next payday. But even if you’re eligible for the full £ 300, you don’t need to use all or part of it.
Will it affect your credit score?
Unlike many credit solutions, Borofree does not check any individual’s credit score. Instead, it checks the credit scores of employers, to make sure they are creditworthy enough to pay the salaries of registered staff.
This could be good news for those who for whatever reason find it difficult to access other types of credit such as personal loans and credit cards.
However, having a good credit repayment record will not be saved either – so using Borofree will not help you increase your credit score.
Is your salary secure?
Signing up to have your salary paid into an account other than your bank account can be scary for some people.
Borofree says it uses electronic payment company Modulr to create a personal account for each user. Your employer must pay your salary into the Modulr account, and that’s when the amount you spent on vouchers is deducted. Then what is left is sent to your regular bank account.
While neither Borofree nor Modulr are covered by the Financial Services Compensation Scheme (FSCS), neither will withhold your money at any time, so you should never lose money even if any of the companies go bankrupt.
Borofree also does not hold your payday advance funds; these are held at the retailers from which you purchase vouchers.
However, the vouchers themselves could become a problem if the retailer goes bankrupt. You will need to make a complaint in writing to the administrators with proof of purchase of the voucher. Some companies or directors will choose to honor the vouchers, but you will not have any official right to a refund.
Do I have to register with Borofree?
This type of payday advance plan has its advantages, especially over payday loans, as it does not charge any fees or interest on what you owe.
However, at the end of the day, it depends on your financial situation and how you use the payday advance. If you occasionally need a relatively small amount, for example if an unforeseen expense strays your regular budget, this could be a great option. Likewise, Borofree says some of its users are using its voucher system to help with budgeting – limiting themselves to spending only a certain amount on clothes, for example.
But if you find that you are relying on payments every month, it might be time to take a look at your spending. If you have other debts, for example, it may be better to consolidate them with a personal loan or credit card, so that you can make monthly payments to reduce the outstanding amount.
Other Ways to Get Your Salary Earlier
Borofree isn’t the only company to offer payday advance options. You can also consult:
- Monzo: Launched in September 2019, Monzo has an account feature that gives users their full pay a day early. However, to be eligible, you must receive your salary directly on your Monzo account via Bacs. This service is not linked to your employer.
- Salary stream: you can use this app to track your wages, but it also offers pay advances of up to 50%. Each advance has a fee of £ 1.75, which is paid each payday. Your employer will set the maximum number of withdrawals you can make.
- Payday advance: if your company is a member, it is possible to borrow up to 50% of your salary. You are charged £ 1.49 per prepayment, which you will repay each payday. You can make up to three withdrawals per month, but your employer may choose to reduce the total borrowings and the number of withdrawals you are allowed.
- Pay in a hurry: participating employers may allow you to take up to 50% of your salary, where you will get the first advance of £ 100 for free, but you will be charged 2.5% of what you borrow beyond that. Employers can set a limit on the number of withdrawals you are allowed to make.
Of course, in an ideal world, you wouldn’t need to access the next month’s pay early at all. If you want to break the habit of spending money before you earn it, we have a plethora of guides with tips on how to budget effectively, as well as ways to save money and to earn extra money.
If you have a debt problem that you don’t know how to solve, contact one of these free contacts for help.