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302% Apr
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Eek...just saw ad for small,short term loans. Typical APR of 302%...this seems almost immoral. Wasn't there an outcry a while back with wonga ? How is this different?
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It's OK if you need say £100 for a week or two and you pay it back as soon as it is due. Borrow £100 for 2 weeks and the fee would be about £10. This can be better than getting overdraft fees or being charged £8.50 a time for the bank to return an unpaid DD . As long as you use it like this it is fine.
As said people take out one loan then take out another larger one to repay the first one, that is financial suicide !
As said people take out one loan then take out another larger one to repay the first one, that is financial suicide !
These high interest, short term loans can be far cheaper than going in to an unauthorised overdraft with your bank.
The interest rates based on Annaul Percentage Rate are a nonsense for short term loans in any case - the loan is not meant to take a year to pay off.
For example, a £200 loan for one month with a repayment of £230 works out at around 900%. Go overdrawn by a tenner with your bank for one day and you could be charged £30.
The interest rates based on Annaul Percentage Rate are a nonsense for short term loans in any case - the loan is not meant to take a year to pay off.
For example, a £200 loan for one month with a repayment of £230 works out at around 900%. Go overdrawn by a tenner with your bank for one day and you could be charged £30.
I have much more hatred for shops such as BrightHouse which sell goods to those with to a very poor credit rating at inflated price with a high interest rate.
Of course a family needs a reliable washing machine these day but does anyone in financial straits really need an LG 55" curved OLED tv priced at £2041 with weekly payments of £26 a month, total to repay £4056?
Of course a family needs a reliable washing machine these day but does anyone in financial straits really need an LG 55" curved OLED tv priced at £2041 with weekly payments of £26 a month, total to repay £4056?
“The question should be this....how can it be legal to charge such ludicrous interest rates in the first place ?”
Have a little think, Mikey. Suppose you’re in the business of lending cash to people you don’t know. A customer wants to borrow £100 for two weeks. If you charge him the current rate for “normal” loans, say a generous 5% p.a., for the trouble of risking your hundred quid with someone you don’t know and have never met, you will receive a little under 20p in interest. Worth it? I don’t think I’d be bothered.
It is simply not appropriate to use the APR calculation for very short term loans. In the example I gave above it would be foolish for any business to provide that loan for less than a tenner - and even that must be paring margins to the bone. It simply wouldn’t be worth the trouble. That’s around 250% p.a.
No, the question that should really be asked is how can the interest rates such as the one I have just described be presented in such a way as to make them appear acceptable (which I believe they are). The main risk with loans is default. I imagine these loans have a far higher rate of default than more conventional long term loans. The cost of default (£100 plus associated costs) is the same whether the sum is lent for a week or a year. Sufficient income to cope with such defaults cannot be made at 20p a throw and to compare the interest rates on the same basis is simply misleading.
Have a little think, Mikey. Suppose you’re in the business of lending cash to people you don’t know. A customer wants to borrow £100 for two weeks. If you charge him the current rate for “normal” loans, say a generous 5% p.a., for the trouble of risking your hundred quid with someone you don’t know and have never met, you will receive a little under 20p in interest. Worth it? I don’t think I’d be bothered.
It is simply not appropriate to use the APR calculation for very short term loans. In the example I gave above it would be foolish for any business to provide that loan for less than a tenner - and even that must be paring margins to the bone. It simply wouldn’t be worth the trouble. That’s around 250% p.a.
No, the question that should really be asked is how can the interest rates such as the one I have just described be presented in such a way as to make them appear acceptable (which I believe they are). The main risk with loans is default. I imagine these loans have a far higher rate of default than more conventional long term loans. The cost of default (£100 plus associated costs) is the same whether the sum is lent for a week or a year. Sufficient income to cope with such defaults cannot be made at 20p a throw and to compare the interest rates on the same basis is simply misleading.
