9889% interest loan -is it extortion or good business sense???

puddings_2

I read this on another forum and nearly fell off my chair!! Quickquid, a company that provides payday loans of up to £750, charges it's customers a rate of interest that makes even store cards and the vanquis visa look like fabulous rates.

1351% You might think that I've missed out the decimal point by accident but no, it is over a thousand percent, and that's only if you are a good risk. Some of the bad risk people taking these loans will be paying seven times as much up to 9889%

Are these companies regulated by the FSA ?
Are there no limits to the interest that they are allowed to charge ?
Am I in the wrong job - shouldn't I become a loan shark then I could pay off my mortgage next year?


These rip off loans are banned in some states of the US. Shouldnt they be banned here too?
http://www.telegraph.co.uk/news/worl...cam-in-US.html


Here's a copy of the small print from the quickquid homepage...

Terms and Conditions apply. Depending on the loan term, typical APRs will range from1351,7%to 9889,3%. Loan amounts are based on consumer's credit history and ability to repay loan. Not everyone may qualify for £750. QuickQuid performs traditional credit checks which includes verifying application information via national databases including, but not limited to, CallCredit Ltd. Funds deposited via CHAPS for delivery same working day, if approved by 14:30. Approval may take up to 30 minutes in most cases. Payday advances should be used for short-term financial needs only, not as a long-term financial solution.
Customers with credit difficulties should seek credit counselling.

jd87

What's the big deal? APR is Annual Percentage Rate, but nobody ever has these loans for a whole year. APR is meaningless in this situation. Most of these companies are open and honest about their charges.

theartfullodger

APR is not meaningless in this situation.

It is the interest rate you will be being charged for the loan: More importantly, if for whatever reason you are unable to pay when you expected and/or default it REALLY WILL HIT you that it is the APR you will be paying.

Wonga of course quote an even higher figure than Quidco's 1351% (Ouch!):2689%!! (Ouch! Ouch!)

Sorry jd87. These companies may tell you their charges, but usually that's not the most obvious & clear thing that you notice so no, most fair minded decent people don't regard them as "open and honest". Most fair minded and decent people regard them as wicked institutions exploiting people in difficult & unfortunate circumstances. My opinion of them is unprintable in a family newspaper.

Cheers & best wishes to all, including those who don't agree with me.

Lodger

daveyjp

When you have been in the unfortunate position of living hand to mouth you may find these deals quite attarctive.

Many years ago I used to be in a position where I was close to going o/d and get stung for charges. I used to cash cheques at the PO.

A £100 cheque would cost £5. Work out the APR on that, but the bottom line is £5 paid to the PO saved me a lot more than the OD charges.

Work out APR on an overdraft charge (£35 for £1 overdrawn for a day) and come back to us.

nomoneytoday

They are a rip off, but the APR doesn't tell a true story.

AFAIK the APR is based on a £1500 loan over 1 year. Since these loans are for small amounts and short periods the number will skew up. I believe Martin had an example of borrowing £20 from a mate, then buying them a pint a week later. The APR on that was even higher than 1000% :eek:

Rafter

nomoneytoday beat me to it. If you borrow £50 from a mate on Friday and buy him a beer costing £2.50 on monday to say thanks, the interest rate is 1.64% per day which is an APR of 37,747% if you borrowed only £20 it would be 4% per day and an apr of 167,323,384%

Payday loans are expensive, but are usually for small amounts and for people who have a poor credit rating and history of not being able to pay their debts.

Would you go into business and make weekly loans of £50 a time with your time and paperwork, staff costs etc and a 5% risk say that you wouldn't get your money back and charge an APR of say 20%? You would earn a grand total of 17.6p in interest which is barely enough to buy the paper to print the loan agreement on - let alone everything else.

Personally I think APR is ridiculous for these products. They need to be regulated in a different way with a maximum charge and a BIG health warning about the total cost of borrowing.

R.

AmosRingtone

It is refreshing to hear people taking about this type of borrowing with a level head. The Artful Doger seems to be on every forum, on some kind of mission. Nobody in their right mind borrows intending to default. If used practically these loans can be so useful for many people. I agree that they can be expensive if you pay late but as always talking to your creditors will help you avoid runaway interest. There is no way that this type of loan could be commercial viable to the creditors without the skewed APR calculation distorting the real cost. It is going to cost a certian amount over a short term and there needs to be a profit. Annualising the cost means nothing.

~Brock~

AmosRingtone wrote: »

It is refreshing to hear people taking about this type of borrowing with a level head. The Artful Doger seems to be on every forum, on some kind of mission. Nobody in their right mind borrows intending to default. If used practically these loans can be so useful for many people. I agree that they can be expensive if you pay late but as always talking to your creditors will help you avoid runaway interest. There is no way that this type of loan could be commercial viable to the creditors without the skewed APR calculation distorting the real cost. It is going to cost a certian amount over a short term and there needs to be a profit. Annualising the cost means nothing.

Completely agree, but how could we ever think of denying people the right to not let the facts get in the way of a good story eh? :beer:

chuckley

JD87 is correct, they are not taken out over a year. they HOPE u default, extend, payment plan, HOWEVER they are taken out for a month so the rate doesnt matter in the slightest, all u pay is the 25% interest. borrow £100 and pay £125.

if u take this out as a long term thing then obviously its a problem, but no1 in their right mind would do that.

if u cant pay it back on payday, u shouldnt apply for the loan.

i personally think PDL's are great for emergencies. who really expects/plans for their car to break down?! pet to need taking to the vets, losing a travel card, e.t.c.

its called life, and these loans are purely for these things, hence the short term agreement (around 30 days).

duggie1982

chuckley wrote: »

JD87 is correct, they are not taken out over a year. they HOPE u default, extend, payment plan, HOWEVER they are taken out for a month so the rate doesnt matter in the slightest, all u pay is the 25% interest. borrow £100 and pay £125.

if u take this out as a long term thing then obviously its a problem, but no1 in their right mind would do that.

if u cant pay it back on payday, u shouldnt apply for the loan.

i personally think PDL's are great for emergencies. who really expects/plans for their car to break down?! pet to need taking to the vets, losing a travel card, e.t.c.

its called life, and these loans are purely for these things, hence the short term agreement (around 30 days).

Thats true. I needed £100 fast then using one of these companies might be my only option (thankfully i dont) 2 weeks later pay back £120. not too bad

iolanthe07

Thats true. I needed £100 fast then using one of these companies might be my only option (thankfully i dont) 2 weeks later pay back £120. not too bad

But surely it would be much better to put emergencies (like the car breaking down) on your credit card?