Just how high can a loan apr go ?
Just seen an advert for the money shop and the apr was 2961.4 % variable.
Had to rewind and pause.
Crazy, just crazy.
The APR is representative.
Yes, if you took out a loan and paid it back over the course of a year you would pay an absolute fortune. However, for the purposes of 'payday' or short term loans where they are mostly paid back within a month, the APR rate is largely irrelevant.
For example - take out a £200 loan with a well-known payday lender over a period of 30 days, and you would pay back approximately £267. Granted this is still a lot
of interest, but for people who are in a situation where they need to borrow money for a short period of time, and CAN AFFORD TO PAY IT BACK ON TIME (that's the killer), I don't see an issue with them.
So long as the terms are clearly explained (including a clear explanation of the amount that you would be paying back) then I don't see a problem with them. The majority of people who whinge about them are either people who have been caught out by not reading the terms and conditions properly in the first place, or people who have never been in the situation where they need to borrow some extra money for a short period, and so cannot understand why somebody would need to use the service.
I've used a payday lender (the one with the annoying old people on their adverts!) on numerous occasions to fund the purchase of bikes, which I have then split and sold on. I've always paid the loans back on time (I take the loan out for a period of 30 days, and on the majority of occasions I've paid them back within a week) and I've always had a back-up should I be unable to repay it by selling the bike parts. I've always been 100% clear on how much I'd be paying back, and I've always been more than happy with the service I've had from them - Payday loan companies are one of the very few lenders who don't charge an early repayment fee, so if I take the loan out for 30 days and pay it back within 5, then I only pay 5 days worth of interest.
I really don't see a problem with them, so long as they are governed properly and so long as their terms and conditions are completely clear for people to see before taking out a loan. Yes the interest is sky high, but this is reflective of the demand for the service and the fact that the majority of people are happy to pay it if it means that it can get them the money that they need. There will always be people who take the loans out knowing full well that they cannot afford to repay it, and unfortunately these are the people who whinge and moan and end up on Watchdog.