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 Post subject: 2961.4 %
PostPosted: Tue Oct 29, 2013 1:08 am 
retrobike rider
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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.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 10:07 am 
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Location: The land of Lea & Perrins
videojetman wrote:
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.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 12:19 pm 
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Location: 钓鱼岛是中国的
They can get away with charging crazy interest rates because people, these days, are desperate enough to go for it anyway. After all, if you get a crazy expensive loan, you can go buy some food. Don't and you'll have starved before repayments would have been an issue.

Now, you'd recon someone would step in, but apparently not. We're just supposed to think wonga slipping tories the occasional tenner is a sheer coincidence.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 12:38 pm 
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Payday loan companies (along with any other loan company) have a duty towards responsible lending and in theory shouldn't offer loans to people who can't pay them back. Unfortunately there are those people who, although they correctly declare their income, do not disclose many of their regular outgoings in order to make them appear to be in a better financial position. Ultimately these are the people who slip through the net, get offered a loan, can't pay it back and then make the headlines because they owe £10,000 on a £500 loan.

As I said before, I'm more than happy with the service I got when I took out short term loans and I knew exactly what I was getting in to before I signed anything. I'd welcome any change which tightened up the regulations, but I certainly don't think that payday loan companies should be banned altogether.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 3:03 pm 
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I'd rather a two pronged attack. Regulate the hell out of them, and erode the demand for them in the first place. There's a reason they only popped up when the economy slapped us all silly.

While we're at it, ban "Sun Life" over 50 pretend life insurance too. Parkinson should be ashamed of himself.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 3:04 pm 
Gold Trader / PoTM Winner
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Barneyballbags wrote:
....take out a £200 loan with a well-known payday lender over a period of 30 days, and you would pay back approximately £267....


Even 33.% is a whack too much, when my savings only get 2.5% MAX

Further, the whole principle of credits and loans is, to me, unconfortable at best... apart from the obvious mortage or CC for holiday use, if you aint got it, dont spend it!


G


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 4:48 pm 
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unkleGsif wrote:
Barneyballbags wrote:
if you aint got it, dont spend it!

G


Having spent years digging myself out of a financial hole (thanks to my stupidity as a teenager), I agree with you. However, some people find themselves in a situation when they NEED to borrow a small amount of money for a short amount of time. To give an example, if my car broke down and I needed £200 to get it repaired and it was getting towards the end of the month, then I wouldn't have the money to pay for it. I would therefore look at borrowing it from a payday loan company until payday, when I would be able to pay it back.

In cases like this I can totally see the point of payday loan companies.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 7:48 pm 
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But do you also see how the sky high interest rate can really screw you over in such a situation?

If someone can't make ends meet that's when the state should do it's job. Not some Legal loan shark with a marketing department.

I wonder if wonga would lend you the seven hundred quid to declare bankruptcy??


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 8:13 pm 
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Bats wrote:
If someone can't make ends meet that's when the state should do it's job.
What job? Lend poor people money? Give poor people money?

Payday loans are expensive because they are high risk. A LOT of the money lent is never paid back.

I just looked at Wonga's site (which no doubt means I'll see their ads for weeks now) and it's clear as day what the terms are. They couldn't make it any more obvious, even to a moron. Pay your money take your choice. I can't see any problem.


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 Post subject: Re: 2961.4 %
PostPosted: Tue Oct 29, 2013 8:22 pm 
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technodup wrote:
Payday loans are expensive because they are high risk. A LOT of the money lent is never paid back.

I just looked at Wonga's site (which no doubt means I'll see their ads for weeks now) and it's clear as day what the terms are. They couldn't make it any more obvious, even to a moron. Pay your money take your choice. I can't see any problem.


This. Exactly this.


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