I can have a loan ... but at 189.2% APR !

thriftybabe

Pobby wrote: »

It`s so sad that people don`t use their local credit union instead of these door step lenders.

They are great Pobby especially for those people who cannot get credit anywhere else. However, do they not need to be shown to save so much before they can apply for a loan?

Robert_Sterling_3

incher wrote: »

Surely it's immoral and the government should put a stop to it? What do you think?

These are "Lenders of Last Resort"
When no one else will lend someone money they will.
This is a high risk enterprize.
If the payments are made in cash then they are probably collected at the door
( if the borrower is in ).

The Musical Blood Brothers has been running for over twenty years in the West End. I have seen it about eight times. It gets a standing ovation at every performance.

"living on the never never.
constant as the changing weather..."


They borrow from a lender of last resort.
One verion of lending goes like this

I lend you £50
You agree to pay me back £10 per week for 7 weeks.
However at the end of week five you tell me you cannot pay this week.
I say OK, I always like to help, I will lend you another £50.

Same terms as before.
I hand over £20.
( I am still owed £30 from the first loan you see and I do an early on the spot redemption ).
Now I will have to go round again each week for seven weeks.
If you recommend me to your neighbours and they subsequently sign up for £50 I will give you a fiver.

Homework:

If someone takes the first loan and takes the second loan as described above and goes on to take a further similar loan after a further five weeks but then goes on paying the third loan over the seven week period then what is the APR for the loan over the 17 week period.

Please show your working.

Livingthedream

Robert_Sterling wrote: »

These are "Lenders of Last Resort"
When no one else will lend someone money they will.
This is a high risk enterprize.
If the payments are made in cash then they are probably collected at the door
( if the borrower is in ).

Old fashion Money lending from the dawn of time, if people are desperate they will pay the APR whatever rate it is at

Castleman

Supercharge_Me wrote: »

Question why you would need £300 over a year term. Thats less than a weeks pay

Minimum wage £5.73

Standard 37.5 hour week = £214.88. Subtract tax, NI, other expenses from that and it's nowhere near £300!

Gorgeous_George

incher wrote: »

They provide a handy example: Cash loan amount £300. 57 weekly repayments of £9. Total amount payable £513. typical 189.2% APR.

On very small loans, the admin costs make the APR seem extortionate. £213 in fees could be justified by:

a. interest
b. cost of making 55 collections in person (time and travel costs)
c. risk of default
d. costs of employing collections companies.

GG

lethal0r

this is where the APR is an unrealistic measure of a loan.

with this loan you dont even pay back twice what you've borrowed. with a mortgage you can easily pay back three times what you've borrowed. so isnt a mortgage therefore the worse deal?

the really high APR figure makes it sound much worse than it really is.

as always the best way of looking at is how martin suggests - how much you repay in total including all fees.

Broken_hearted

No-one forces them to take out the loans

SingleSue

For some, it is the only way to access money.

They may have lost their job and be claiming unemployment, they may be a single parent on a very low or no income, they may be disabled or ill and having to survive on handouts, they may just be a family who is suffering a temp hardship who have maybe a late payment meaning they cannot get a mainstream lender.

What would you do if you was in any of the circumstances above and your washing machine broke down or your cooker stopped working and you have a family to feed or keep clean?

Yes, they may prey on the unlucky (or of course the !!!!less) but they do serve a purpose for those who are outside of the normal lending areas...as most people who are on benefits are.

I have had a loan from Provident before but at the time, it was an emergency and there was no other way. I didn't like doing it but my cooker had broken down, my savings by this time completely depleted and being on benefits meant that I could not have finance or loans.

As a needs must thing, it helped.....but it wouldn't be something I would do for luxuries or to have a wad of cash in my pocket to blow on something frivalous.

Broken_hearted

Its that illusive need again. Clothes can be washed by hand, not easy and very time consuming. Cooking can be done in a microwave which you can pick up from around £15.
Or you could get them from freecycle.

Drea

Pobby wrote: »

It`s so sad that people don`t use their local credit union instead of these door step lenders.

I have a loan with Provident (yes, I was desperate at the time, my ex hadn't been paying rent when I thought he had and we didnt have long to pay it back!), I did try several credit unions and none of them would give me a loan. So I guess that's why people don't go to credit unions instead