legal loan sharks 177% !!!! interest

Helenfront

My Son was recently sent a letter inviting him to take out a loan with Provident Finance, he is 18 and has just left college. The typical APR was 177%, I thought it was a typographical error, until I went on their website. Surely this is either illlegal or a type of legal loan sharks.

lynzpower

nope, its not

enjoyincubus

I think they are classed as "Doorstep lenders" or "Home credit providers". These are usually people who offer low value short term loans and the money is collected in person (from what I have read). APR's can look extremely high because of the short term nature and many people never end up paying back the original loan as they just keep borrowing more.

I believe the DTI were looking into this a year or two ago but I am not sure what the conclusion was.

cmjohnson_86

Yea, alot of people use Provident

had to when I was desperate. Never again though.

kevtrader

I've never used them and don't know anybody who has but that amount of interest is way OTT!

cmjohnson_86

I borrowed £300 and am paying £441.60 back

lswwong

Received a "cold" mailshot from these people recently. They must have gotten my address and surname from some sort of register (less likely the electoral roll as I have opted not to disclose my details publicly) - it was addressed to "Mr XXXXX" and I am female.

Yup! 177% APR quoted in print. Scandalous.

I am now thinking what I can send back to them in their pre-paid reply envelope??? A brick? It's only 2nd class. Oh! How about photocopied £20 notes up to the value of £300? (Hey, here's me giving them fake money!)

Would love to post a copy of the mailshot cover letter here but probably not a good idea .......

KittyKate

I've actually seen ads for Provident on buses (stickers on the wall).

The APR must have been in tiny print because I couldn't see it. All it said was 'need a new fridge? holiday? car?' etc with pictures of money, smiling people and pound signs. Presumably not Provident customers! What a con.

rog2

Just have a look at the threads about PROVIDENT on the DFW forum, or do a quick site search for PROVIDENT
The interst rates are correct - and, yes, this company does enjoy a certain amount of respectability in the sector of sub-prime lending.
In my opinion, they prey on the vulnerable - they offer relatively small loans at extremely high rates of interest, tempting people with the offer of 'cash in the pocket'. They are also known to ffer 'top-ups' thereby keeping the debtor in their clutches.
I appreciate that for 'quick-fit' finance the apr is not necessarily the most important factor - the term for most of their 'loans' being less than a couple of years. Nevertheless, it is how they make their money and the rate is extortionate.
It is difficult to advise someone who is desperate, and has been refused mainstream finance, not to take them up on the offer - indeed many people will argue that when their back has been against the wall Provident has offered them their only hope.
So, not wanting to start a war - I can only advise you to steer well clear of these legal loan sharks.
Also worth bearing in mind is that VANQUIS, who offer credit cards with up to, and over, 60% apr, are part of PROVIDENT.

Astaroth

They service a sector of the market which would otherwise not be able to get credit.

The other aspect of cause is that they deal in low value and frequently short term loans... APR on the other hand is calculated on the basis of a £1,500 debt over 12 months. If you look at the "pay cheque" cashing services their APRs are generally even higher due to the standardised calculation.

If you had a "normal" provident type loan of £200 over 6 months then at a more standard APR (say 10%) your total repayment would be £205.62 - could you really see any company going to the effort of selling loans, having to collect monthly payments etc all to just get £5.62 back? It would in no way cover the administration costs for the loan (esp as Provident still fairly often use weekly door to door collections to get payments)

24skins

I live in a working class area, its very common for people to have 'provvy' loans. As someone said before they come to the door to offer their products and collect payments. They like to imagine they are a 'friendly' service. The APR is in tiny print and probably only mentioned once, when the loan is set up, after that it would be small weekly payments, probably £3-4 per week. Typically you would pay back around 1 and a half times what you have borrowed (ie £300 on a £200 loan). The representative will regularly offer to extend the loan and some people remain with Provident indefinetly.
In our area a financial co-op (where local people can save or borrow money)has been set up so that people can avoid these sort of loans, I would urge anyone considering a provident loan to see if there is anything similar that they could use instead.
I believe that 'Bright House' is similar and also to be avoided, if possible.