Mutual Loans Card Through The Door - Sounds Dodgy

[Thunderchild]

I have now received 2 leaflets through the door advertising a "mutual loan"

Figures don't add up to me, a loan over 51 weeks of £500 will cost £200. I thought that percentage calculation would look like: (200/500)x100 = 40% and it's under a year as 51 weeks rather than 52 so 52/51 = 1.096078x40% = 40.784%.

So where did 104% come from and even 40% is huge and it looks like they are trying to imply 4% (you pay back 104% of what you borrowed).

Another worrying thing is that I have now had 2 of these with a sticker on them quoting my local agent with just a first name and mobile phone number.

The reply address on the card that folds in half into a pre stamped return item is a local one and the company is "Mutual clothing & supply co ltd"

Is it me or this this dodgy as hell. Aparently mutual clothing and supply co limited is authorised and regulated by the financial conduct authority. Are the agents ?

[factor-fiction]

Because you are repaying the loan over the course of 51 weeks the average balance is roughly half of the initial amount. The APR reflects the interest compared to the average balance. I don't know enough to reconcile it exactly. Maybe there is an admin charge too

[AlwaysConfused]

I think all such lenders should stand in the corner and hang their heads in shame.
Howver, in answer to your question, Mutual state "We are a family owned home collected credit company operating from 15 branches primarily in the
East Midlands of England. We took an ac ve part in the 2005 enquiry in to the Home Credit Market. We do not offer pay day loans"

Mutual do have a website https://www.mutual.uk.com/
and a catalogue https://www.mutual.uk.com/news/new-catalogue-out-now-49

Flicking through, they appear to be legal (thats not to say they are)

[BlackadderV]

The calculation of APR is a complete mystery to me too.

[Thunderchild]

and I take it someone at the end of a mobile phone is qualified and authorized to dish out such loans ? this sounds to me like you contact someone who pressures you into the sale of the loan and if you complain you will find that they are self employed agents working for themselves that the company does not answer for. if there is a website why not just drop a leaflet through the door with the web address ? indeed the leaflet does have one so why do I need to contact some nobody on a mobile phone ?

[Buenchico]

Mutual has been around for over a hundred years. It's the main competitor to Provident, which has a similar long history. My mother always ensured that there was enough money to make the weekly repayment when the 'man from the Provvie' came round each week, as did nearly everyone else in our street.

While, of course, both Provident and Mutual have websites, they continue to operate in the traditional way, with agents calling to collect money (and, of course, to try to get customers to take out new loans when they've just paid off previous ones).

Like all lenders (from Coutt's to Wonga), they have their critics but they're perfectly legitimate.

[Thunderchild]

See you have made the mistake they were hoping for:

http://www.nfumutual.co.uk/
versus
https://www.mutual.uk.com/

The company is called "mutual clothing & supply" co ltd not nfu mutual

[Thunderchild]

and to get two leaflets from 2 different people in a week sounds like pressure selling to me.

[FrogNog]

Probably. Just shove them in the recycle and forget about it.

[Thunderchild]

The leaflet sais in bold at the top "Choose a MUTUAL Loan", only in the fine print it says the full company name and on the return address, the intention to mislead is clear.

[Thunderchild]

oh and I'll be sending them back blank, the least i can do is cost the toe rags money!

[Buenchico]

^^^Rubbish!

'Mutual', as a lender, has been around for far longer than the farmers' lender (now called NFU Mutual) has been promoting its products to the general public. There is absolutely no reason why 'Mutual' would pretend to be anything to do with 'NFU Mutual'.

[Thunderchild]

well they just say mutual, they miss out the clothing supply bit where possible. Obviously selling loans now is like selling stuff out of catalogues etc.

[Thunderchild]

so what is APR then ? how is it calculated.

[factor-fiction]

Can you give details of the repayment schedule please so we can check the APR figure in this case. Thanks

[Thunderchild]

If I borrow £500 and pay back in 51 weeks at £13.80 per week apparently I'm paying in total £700 so 500+200 interest it's actually £703.80.

My impression was that APR was the annual cost of the loan to include fees and interest rates so as i calculated earlier

[factor-fiction]

That looks like around 75% APR to me - but are you sure there isn't a one off payment at the end or other fee

[Buenchico]

'APR' is far more complex than your calculation, Thunderchild. I've got a degree in maths it still takes me quite a while to get my head around it!
http://en.wikipedia.org/wiki/Annual_percentage_rate#European_Union

[Thunderchild]

in fact putting the figures into an "APR calculator" with the stated 104% gets a total "cost" of nearly £840.

@Buenchico Sorry but the whole point of APR was to calculate the annual cost taking into account all costs so fees and interest. Probably to stop scumbags offering low interest rates with a large setup fee. The whole point was to simplify things to make sure adverts were clear and fair and an APR value must compare across the board, to say that you need more than a degree in maths and that it's oh so complicated is nonsense.

They claim a £200 cost for £500 lent over almost a year (the 51 weeks instead of a full year is suspicious in itself) that is if we call it a year 40% no ifs, no buts, what is in that £200 is not my problem as the consumer, that is why they came up with the APR system.

[factor-fiction]

But it's nothing like 40% APR either, thunderchild.
Is your point that they may be deliberately overstating the APR because they think gullible people may interpret 104% as only 4%?

[Thunderchild]

indeed, according to an online calculator assuming a year because no one lets you calculate 11.75 months! it's around 65% so no figure adds up.