Payday loans

[MintTrav]

It's hardly a new thing.

[AndrewT]

It's hardly a new thing.

This - the difference is that Wonga won't send two guys with baseball bats round your house to collect.

[Jon MW]

... But one thing is I don't understand , why people still goes to them ? ...

The majority - because they're desperate

FYP

The genuinely desperate and without any other option are a minority.

A case study I read a few months ago to illustrate the Payday loan rip-off was someone who lost their job just before Christmas and was "desperate" because they "needed" £500 for their toddlers Christmas presents.

Some customers might actually need to borrow money to pay for food (for example) but a lot of them are only that desperate at the end of the month because they paid for all their other optional luxuries nearer the beginning of the month.

These could be described as 'desperate' but I think 'stupid' covers it more accurately.

[MintTrav]

... But one thing is I don't understand , why people still goes to them ? ...

The majority - because they're desperate

FYP

The genuinely desperate and without any other option are a minority.

A case study I read a few months ago to illustrate the Payday loan rip-off was someone who lost their job just before Christmas and was "desperate" because they "needed" £500 for their toddlers Christmas presents.

Some customers might actually need to borrow money to pay for food (for example) but a lot of them are only that desperate at the end of the month because they paid for all their other optional luxuries nearer the beginning of the month.

These could be described as 'desperate' but I think 'stupid' covers it more accurately.

Certainly applies to some.

Certainly does not apply to all.

How are you so sure which element is the minority?

[Jon MW]

... But one thing is I don't understand , why people still goes to them ? ...

The majority - because they're desperate

FYP

The genuinely desperate and without any other option are a minority.

A case study I read a few months ago to illustrate the Payday loan rip-off was someone who lost their job just before Christmas and was "desperate" because they "needed" £500 for their toddlers Christmas presents.

Some customers might actually need to borrow money to pay for food (for example) but a lot of them are only that desperate at the end of the month because they paid for all their other optional luxuries nearer the beginning of the month.

These could be described as 'desperate' but I think 'stupid' covers it more accurately.

Certainly applies to some.

Certainly does not apply to all.

How are you so sure which element is the minority?

Working with people who work with rent arrears

There's a big overlap of the payday loan market with the rent arrears sector

Genuinely unlucky and unfortunate people are a tiny minority - even given some of the extra people who aren't in the overlapping areas it would still make the overall amount a minority.


EDIT: and more accurately of course, I'm not sure - it's a hypothesis which I have seen evidence to support but not evidence to disprove.

[MintTrav]

There's a big overlap of the payday loan market with the rent arrears sector

That's an argument to support your case that they have plenty of money?

[Jon MW]

There's a big overlap of the payday loan market with the rent arrears sector

That's an argument to support your case that they have plenty of money?

Depends on your definition of 'plenty'

The gist of it is that a very small minority of tenants in rent arrears have an income below what they need to survive on - they end up in debt because of how they use that income rather than it's absolute value.

[Cf]

I don't have a problem with the APR as it's not really a suitable measure.

Having a quick look the site if I want to lend £200 for 10 days it's going to cost me £26.05.

Seems fair enough for me. I'm being charged for a service. Fine.

But charging the interest for 60 days past the repayment date is a bit of a killer. They currently also have a £20 missed payment fee.

Why not just do £20 missed payment fee + BOE interest rate. That way Wonga still get the initial charge, the late fee, and they're not losing money by holding onto the debt. And to my mind that such help quash a number of the morality questions.

But I'm no expert so that might not work

[redsimon]

Volunteering in a CAB the majority of debt cases with pay day loan debts are working or in infrequent work and have exhausted other forms of lending. Obviously some of the cases are "stupid" whatever that means, but not so clear cut to say "Why don't they manage their lives better or use cheaper credit"

[DungBeetle]

I don't have a problem with the APR as it's not really a suitable measure.

Having a quick look the site if I want to lend £200 for 10 days it's going to cost me £26.05.

Seems fair enough for me. I'm being charged for a service. Fine.

But charging the interest for 60 days past the repayment date is a bit of a killer. They currently also have a £20 missed payment fee.

Why not just do £20 missed payment fee + BOE interest rate. That way Wonga still get the initial charge, the late fee, and they're not losing money by holding onto the debt. And to my mind that such help quash a number of the morality questions.

But I'm no expert so that might not work

Seems a good idea to me.

[redsimon]

I don't have a problem with the APR as it's not really a suitable measure.

Having a quick look the site if I want to lend £200 for 10 days it's going to cost me £26.05.

Seems fair enough for me. I'm being charged for a service. Fine.

But charging the interest for 60 days past the repayment date is a bit of a killer. They currently also have a £20 missed payment fee.

Why not just do £20 missed payment fee + BOE interest rate. That way Wonga still get the initial charge, the late fee, and they're not losing money by holding onto the debt. And to my mind that such help quash a number of the morality questions.

But I'm no expert so that might not work

The longer you owe the lower the interest rate is? Hope I don't see you on Dragons Den with that

[DungBeetle]

It's a fair point though.

The argument they use is the APR is not appropriate.  So let's make sure it isn't an APR and switch to, say, a normal credit card rate if you are struggling to repay.

[BorntoBubble]

There are many other issues with these companies then the apr. the apr is a tax on the desperate/needy/stupid whatever you want to call them. I'd love to discuss the ins and outs of the issues but due to my job I don't think it's a good way to go! The government are not that bothered I would say about the apr.

[Cf]

I don't have a problem with the APR as it's not really a suitable measure.

Having a quick look the site if I want to lend £200 for 10 days it's going to cost me £26.05.

Seems fair enough for me. I'm being charged for a service. Fine.

But charging the interest for 60 days past the repayment date is a bit of a killer. They currently also have a £20 missed payment fee.

Why not just do £20 missed payment fee + BOE interest rate. That way Wonga still get the initial charge, the late fee, and they're not losing money by holding onto the debt. And to my mind that such help quash a number of the morality questions.

But I'm no expert so that might not work

The longer you owe the lower the interest rate is? Hope I don't see you on Dragons Den with that

Well the idea is they claim APR isn't an effective measure and they see it as a "fee" rather than interest. So give the loan and rather than put interest on it charge a "fee". So if someone doesn't pay then charge a penalty. This way they've made money via the initial fee + penalty. The then base rate of interest stops them losing money on it whilst waiting to be repaid.

[DungBeetle]

There are many other issues with these companies then the apr. the apr is a tax on the desperate/needy/stupid whatever you want to call them. I'd love to discuss the ins and outs of the issues but due to me working for experian I don't think it's a good way to go! The government are not that bothered I would say about the apr.

Question for experian man - if you take out a Wonga loan and pay it back on time, is that seen a positive in the credit score world (loan settled) or a negative (you have used Wonga therefore don't manage your money)?

The reason I ask is whether it is a quick way for a young person to build up a credit history (borrow £100 a few times and pay it back)