2278% apr?????????

MrsBartolozzi

Funnily enough, I've just had a similar conversation with my son who too was horrified by the APR stated on screen as we watched tv together.
I'll ask you the same question I asked him then Zaksmum:
If you needed to borrow £100 for a week what do you consider a decent and proper charge to pay back on top of the £100 the following week?




He suggested that a tenner would be a decent amount, not too much extra to pay, but enough to cover their expenses. It's what you might pay a mate who got you out of a sticky unpaid bill situation.
Well, guess what? The fees on Wonga for this transaction were only slightly higher than a tenner - £12.78 and still 2668% APR. So in this case APR means very little. They could just charge a fee of say, £10 + a more "normal" APR but this would probably lead to abuse with people just borrowing for longer and longer periods rather than borrowers addressing their financial situation or getting a real loan from a bank.








Edited to add:

http://www.ehow.com/how_6673595_calculate-daily-interest-rates.html
I wondered just how much interest one would pay on a £100 loan for 7 days if a "normal" rate was offered. This site works in simple interest rather than compound, but the short period the loan is taken over won't make this much of an issue. At a more "normal" rate of 10% (keepin' it simple). The interest rate would be in the region of 27p per day = £1.91 per week. I'm sure that even you can see that this is a paltry sum for any service of this kind, and would never cover the costs of the admin involved, never mind make a profit (like it or not, they are a business).

CLAPTON

borrow £100 and repay 110 after 1 week is an APR of over 14,000% APR
borrow £100 and repay 110 after 2 weeks is an APR of over 1,000% APR


borrow £100 and repay 120 after 1 week is an APR over 1million %
borrow £100 and repay 120 after 2 weeks is an APR over 26,000 %
borrow £100 and repay 120 after 3 weeks is an APR over 2,000 %
borrow £100and repay 120 after 4 weks is an APR over 900 %

but then everyone knows that

bungle4by4

HamNeggs wrote: »

In my first post I explained that I had refrained registered purely to respond to an individual who was immensely infuriating. This thread highlights why I had not bothered previously and will not do so again.

Martins Money Tips Forum reminds of a film called GroundHog Day. What was a good idea has now degenerated to a chat forum involving repetition, petty mindedness and bickering. The threads appear to revolved around:

1. I took out a payday loan and can't pay it back - Repeated 10,000 times

Instant response - endless succession of people telling advising others that they shouldn't have taken it out

2. I can't manage my monthly expenses

Instant response - similar number of people requesting that the posters post an SOA on the site, advertising their personal affairs to the world for the sole purpose of providing voyeuristic pleasure to other readers who can provide the stock answers such as 'this is a lot have you considered cutting down' - of course they have considered cutting down. The purpose of an SOA on MSE is purely to enable Mavis to shout out 'oooh Johnny look how much this person spends on food, aren't I clever for doing it so much cheaper'

3. I got a parking ticket in ASDA do I have to pay it.

This should be a template on the site to save the 1,000,000 people who have asked the question to date having to type it again and again

The list is endless, unfortunately the variety of questions is not.

But perhaps the worst of this site is the endless bickering, name calling and personality driven responses which seem to pervade the entire forum. There appear be individuals who have posted in the 10s of 1000,s who view this site as a personal domain and who live virtual lives through it. Cliques are formed, new posters are either derided, judged or labelled 'Trolls' (whatever one of those is), being accused of having no lives by people who spend virtual lives on here - there is an irony there which beggars belief.

I congratulate those who genuinely look to support others but I feel myself that this forum is not the pleasant and friendly support domain it was doubtless originally set up to provide. Human nature and pettiness have seen to that.

damm thats accurate. can't believe i waste my time here...

nope not being sarcastic, i think thats a very accurate picture of this forum.

vwelsh13

I have seen one even worse it was 2600+ % !!!:mad:

Apples2

zaksmum wrote: »

Sensationalist post? I was just amazed at the APR which by any standards is huge.

By WHAT standards??

You have been given a few examples to show how this works so you should by now understand the irrelevance of it.

When I ring the Holiday Inn and ask for a Room for one night, they don't say,
"That will be £32,850"

The Holiday Inn will simply tell me how much it is for one night, not for a whole year.
The Law states that lenders must publish the APR figure, this is the same as telling the Holiday Inn they must tell you the YEARLY rate for that room instead of the single night I want.

I'm sure we would see the same outcry if the Holiday Inn started advertising rooms for £32,850.

Maybe it would be better if you told us what you consider a reasonable APR figure for a payday loan.

iolanthe07

Excellent illustration, Apples. We get these shock horror posts about short term loans every couple of weeks or so. Of course the APR seems high - the companies are obliged by law to quote them - but they are essentially meaningless.

jowie

Apples2 wrote: »

When I ring the Holiday Inn and ask for a Room for one night, they don't say,
"That will be £32,850"

The Holiday Inn will simply tell me how much it is for one night, not for a whole year.
The Law states that lenders must publish the APR figure, this is the same as telling the Holiday Inn they must tell you the YEARLY rate for that room instead of the single night I want.

Nice analogy, but comparing a percentage to an actual monetary value isn't particularly fair. Once you've paid your hotel bill, that's it. With huge interest, you're getting into a downward spiral of debt.

The fact that most people don't know what APR really means on here kinda shows that most people have no idea what they should and shouldn't be doing regarding loans and repayments. If APR is meaningless on Pay Day loans, then the system needs changing so that these loans are advertised the correct way.

Just saying that someone's stupid for not reading the small print isn't very helpful to people. I personally don't think that the government should allow any type of Pay Day loans. It's irresponsible lending.

Consumerist

jowie wrote: »

I personally don't think that the government should allow any type of Pay Day loans. It's irresponsible lending.

It seems to me that the main problem is irresponsible borrowing.

Edit
Used responsibly, payday loans can serve a useful purpose to get over a temporary cashflow problem; they simply are not designed to service long-term borrowing.

Hax

jowie wrote: »

Nice analogy, but comparing a percentage to an actual monetary value isn't particularly fair. Once you've paid your hotel bill, that's it. With huge interest, you're getting into a downward spiral of debt.

Why is a payday loan any different? Once you've paid it back on your payday, then that is, as you put it, "it".

jowie wrote: »

The fact that most people don't know what APR really means on here kinda shows that most people have no idea what they should and shouldn't be doing regarding loans and repayments. If APR is meaningless on Pay Day loans, then the system needs changing so that these loans are advertised the correct way.

Whilst APR values may be meaningless, if anything, they should have the effect of deterring people from taking out a payday loan as they look so "bad" to people who don't know how APR works (as demonstrated by the OP).

However, all the Payday loan sites I've seen make it crystal clear how much you will have to repay and when that repayment is due. Loans don't get much clearer. Go to a site, put in how much you want to borrow and for how long and you get a figure telling you what is to be paid back.

jowie wrote: »

Just saying that someone's stupid for not reading the small print isn't very helpful to people. I personally don't think that the government should allow any type of Pay Day loans. It's irresponsible lending.

Payday loans aren't irresponsible - it's the people who use them badly. The same can be said of any type of finance. By your rationale, "consolidation loans" should also be banned as the person taking it out could be equally stupid and just squander the money instead of repaying their other debts.

CHR15

jowie wrote: »

Nice analogy, but comparing a percentage to an actual monetary value isn't particularly fair. Once you've paid your hotel bill, that's it. With huge interest, you're getting into a downward spiral of debt.

I think the analogy was quite good, once you have paid your payday loan, thats it.

I would like to see a more simple comparison which could convey the same message, the OP in this thread clearly had no understanding of what APR means when used for a very short term loan.

We see lots of, "Buy your mate a pint on Friday if he lends you a tenner on Monday" comparisons but people still don't grasp it.