Legal 2356% loan rate on TV

dnm0pd

Advert on ITV – short term loans, at the bottom of the screen was the APR of 2356% see quickquid.co.uk for full details. This is presumably legal as long as they mention the APR.

In the same vein my son got a letter from Provident offering a loan at 272.2% APR which again must be legal.

He also had a flyer pushed through his door which did not mention APR but to contact Michael on a mobile number for a loan of up to £500. This is a sneaky which I think a lot of hard up people would try. Their web site www greenwoodpersonalcredit co uk gives a rate of 433.4% APR

Perhaps it is time for some legislation.

_Andy_

APRs on short term loans will always seem ridiculously high.
What legislation would you want to see?

talana

dnm0pd wrote: »

Perhaps it is time for some legislation.

Why?
As you've said yourself, their APR is stated so they're not trying to con anyone or pull the wool over your eyes.
People should use their own judgement.

Payday type loans are always going to have high APRs.
I have no problem with that as such, as I can choose not to do business with them.

dnm0pd

talana wrote: »

Why?
As you've said yourself, their APR is stated so they're not trying to con anyone or pull the wool over your eyes.
People should use their own judgement.

Payday type loans are always going to have high APRs.
I have no problem with that as such, as I can choose not to do business with them.

First time I have posted so I could probably have done this another way. My point was that the provi and greenwood loans are aimed at people who do not understand interest rates or who are unable to get credit any other way. I do understand interest rates but others may not.

dnm0pd

_Andy_ wrote: »

APRs on short term loans will always seem ridiculously high.
What legislation would you want to see?

perhaps something to help the people who take out a £300 loan from provi and pay back £546 over 52 weeks. not short term to those paying it back. not a lawmaker that is what politicians are for. I thought this may be a way to help publicise something.

costapkt

Seems to take the P when firms can get away with charging rates like this.

JimmyTheWig

I heard about a test for young children on the radio the other day.
Parent puts a marshmallow on a plate for them. They can either have the marshmallow now or if it is still there in 10 minutes they can have an extra one and eat them both there and then.
It's supposed to show that a child will get on well in life if they can wait it out.

Anyone care to guess what APR (AER, I guess, from the kid's point of view) this represents?
Once you know the answer you will see that sometimes APRs aren't the relevant thing.


[But I agree that some of these companies are taking advantage. It would be great if someone could rein them in. Or even better if people no longer needed their services!]

Rafter

dnm0pd,

Totally agree their needs to be some sort of cap, but as others have said short term loans for short term money are going to be expensive.

If you take out a £10,000 loan over 5 years there is plenty of interest and income to offset the costs of collecting the money, doing the paperwork etc.

With a small loan even a fairly modest cost for paperwork and processing payment looks silly on an APR calculation.

For example, you lend a friend £100. 2 weeks later they pay you back and buy you a pint (£2.50) to say thanks. That is an APR of 90%.

Now say you run a loan company doing lots of these loans, you advertise on ITV, you have to do paperwork, because of the type of loans, a lot of customers don't pay you back. You need computer systems, staff etc - so you can see how the APR gets so big.

Personally I would ban doorstep lending and this kind of loan and introduce a social loan scheme through the post office. Maximum £250 per person and paid for by £5 per week deductions from benefits or pay with a maximum term of 1 year. APR 8%. That way people have a genuine emergency source of cash, without ending up living in hardship though paying most of their disposable income to doorstep lenders or payday loan companies.

R.

talana

dnm0pd wrote: »

First time I have posted so I could probably have done this another way. My point was that the provi and greenwood loans are aimed at people who do not understand interest rates or who are unable to get credit any other way. I do understand interest rates but others may not.

I can see where you're coming from, but if people don't understand interest rates then they have no excuse not to learn. After all, at the most basic level, what do they need to know?
The higher the quoted APR, the more expensive the loan. And that's it!
That simple fact should not be beyond anyone, surely?

So while you're waiting for legislation (it'll be a long wait), it'd be more effective if we all educate our nearest and dearest in basic finance.

Dave101t

if you dont understand interest rates then you deserve to be conned.
and its not even a con, its just bad business

costapkt

On the one hand the Government warn people not to get involved with loan sharks and now there are TV ads encouraging people to pay loan shark rates. Puzzled.