MSE News: Wonga responds to US debt comparison jibes

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This is the discussion thread for the following MSE News Story:

"Martin wrote a blog this week, Borrowing £100 at Wonga's APR costs more than the US national debt after 7 years. We invited Wonga to have its say, so here is the lender's communications director John Moorwood with his response. ..."
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  • PaulW922
    PaulW922 Posts: 1,037 Forumite
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    To be honest, if you are going to attack short term lenders I think Wonga is the wrong target. So many PayDay lenders charge a fixed fee regardless of how long you borrow for and do not allow you to save money by repaying early. Wonga does none of those things and offers tools on its website so you can see how much different options would cost. It also offers borrowers who cannot afford to repay the option to extend the loan for a couple of months, whilst still paying off fees and charges and to a degree avoiding a PayDay loan spiral, (although i would think it is still relatively easy to get into one with Wonga)

    This whole APR thing with short term lending is a bit of a joke because it does not allow you to make a fair comparison between different short term lenders. It is all very well saying that x lender charges 5000% APR but equally another that charges a fixed fee regardless of the period could have an APR of millions of % - how on Earth can anyone understand that?

    Most Payday lenders from what I can see are making huge sums lending money to desperate people, and employ dubious collection tactics too. But equally I think we need to understand that if they charged the same APR rate for a ten day loan as a bank would charge on a personal loan over a year, it simply would not be worth being in business.

    I agree with what doubtless many others would say, that payDay lenders encourage people with no money to get into worse debt and make a lot of money in the process - however Wonga is probably not the worst offender by a long way.
  • ihateyes
    ihateyes Posts: 1,326 Forumite
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    i think in the last 18 mths wonga have improved their reputation a lot, and out of all payday lenders, by far one of the better as well.
    Promo codes are never always cheaper..... isnt that right EuropCar?
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    It's no wonder they've grown to be one of the biggest players in their market with a philosophy like that.

    Interesting to hear, though, that they don't compound interest.
    But according to their terms if you don't pay on time then "interest will continue to accrue on your balance for up to 60 days ".
    Sounds like compounding to me. Presumably the balance will include existing interest?


    And in any case it is, in effect, compounded. See Martin's blog: http://blog.moneysavingexpert.com/2011/05/05/have-credit-card-companies-stopped-charging-interest-on-interest/.
  • dtaylor84
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    It's no wonder they've grown to be one of the biggest players in their market with a philosophy like that.

    Interesting to hear, though, that they don't compound interest.
    But according to their terms if you don't pay on time then "interest will continue to accrue on your balance for up to 60 days ".
    Sounds like compounding to me. Presumably the balance will include existing interest?


    And in any case it is, in effect, compounded. See Martin's blog: http://blog.moneysavingexpert.com/2011/05/05/have-credit-card-companies-stopped-charging-interest-on-interest/.

    Martin's blog post is about Credit Cards and doesn't seem particularly relevant to me.

    From the article by Wonga, they claim in the example they would charge £1.50 a day without compounding. In that case, if you don't pay on time, I'd expect interest to continue to accrue at £1.50/day (up to 60 days or £90). If they were to charge compound interest, the interest charged each day would increase as the outstanding balance increases.
  • davidgmmafan
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    "Our customers get it. They consistently tell us the most important thing is that they can easily see what the actual loan cost will be, before they've clicked a single button or entered their name."

    I actually agree with this point, and it is to the banks shame that people actually use these lenders. There interest percentage may be massive but if these guys say it will cost you x well that's a lot better than the way the average current account works. It might cost this if this happens, but if not it might be this. And that's just one without even trying to compare difference overdraft arrangements to one another.
    Mixed Martial Arts is the greatest sport known to mankind and anyone who says it is 'a bar room brawl' has never trained in it and has no idea what they are talking about.
  • Baricus
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    I can't imagine where I would be now, were it not for Wonga.

    Thanks to being attacked (by a man now in prison for it) I needed financial help to restart my life. I have been a regular customer of theirs for the past two years. On and off, of course, and am now back on my financial feet.

    I've used other payday lenders previously, where borrowing for one day costs £25 per £100 - meaning you pay 25% interest per day. Yet Wonga charge (about) 0.99% per day... plus a fiver admin fee. That means about £6 to borrow £100 for one day, about £7 for two days, about £8 for three days. Etcetera.

    If you need money for a must-have thing or an emergency, and you only need it for a few days, you are a fool to use anyone other than Wonga.

    And if you're the type that reads tabloids and gets pumped full of headlines all day, you'll see Wonga's APR and think they're crooks.

    But life isn't about headlines. It's about facts and reality. Wonga are creditable, decent, quick, effective and NEVER do anything except give you the FULL facts in advance. And if you use them correctly and only when you need to, you'll realise they're the shining beacon of decency in an industry of misleading money-grabbers.

    And a life-saver, if you have an emergency and have nowhere else to turn.


    The case for the defence rests, your honour. :)
  • fadetogrey
    fadetogrey Posts: 1,648 Forumite
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    Baricus wrote: »
    I can't imagine where I would be now, were it not for Wonga.

    Thanks to being attacked (by a man now in prison for it) I needed financial help to restart my life. I have been a regular customer of theirs for the past two years. On and off, of course, and am now back on my financial feet.

    I've used other payday lenders previously, where borrowing for one day costs £25 per £100 - meaning you pay 25% interest per day. Yet Wonga charge (about) 0.99% per day... plus a fiver admin fee. That means about £6 to borrow £100 for one day, about £7 for two days, about £8 for three days. Etcetera.

    If you need money for a must-have thing or an emergency, and you only need it for a few days, you are a fool to use anyone other than Wonga.

    And if you're the type that reads tabloids and gets pumped full of headlines all day, you'll see Wonga's APR and think they're crooks.

    But life isn't about headlines. It's about facts and reality. Wonga are creditable, decent, quick, effective and NEVER do anything except give you the FULL facts in advance. And if you use them correctly and only when you need to, you'll realise they're the shining beacon of decency in an industry of misleading money-grabbers.

    And a life-saver, if you have an emergency and have nowhere else to turn.


    The case for the defence rests, your honour. :)

    That was a public information notice courtesy of a director of wonga....;););)
    counting down the time I got left.:beer::beer:
  • justin1972uk
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    I've used both Wonga and Quick Quid in the past. Both are reputable lenders as far as I'm concerned.

    If you need to pay a bill a few days before your next payday, it's worth paying, say, a tenner to Wonga, instead of getting charged £25.00 by your bank for going overdrawn and additional late payment fees from whichever company issued the bill.
  • SewerSide
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    It's worth bearing in mind that without the Wonga's of this world, more people would use loan sharks, and get into a lot more trouble for it.
  • Dear John,

    It has indeed been a busy summer, although you have been collecting high profile clients for some time - remember Steve Perry, Wonga loaned money to him 19 times in 14 months, came to around 6k in total, remember? Think I wrote the book on it ....

    Anyhow my intention is to respond to your article, and perhaps even mention a few things you have missed. And for anyone reading I will repeat what I have always said, that I maintain my full share of responsibility for the catastrophic situation which allowed me to take out 64 separate payday loans in 18 months or so, from a dozen lenders - maybe before we are done John would like to admit to Wonga getting it wrong too?

    I would start by actually agreeing with you John, the whole APR issue is a bit farcical and absolutely miss-leading, and in fairness yes people absolutely understand how much they will repay on any money they borrow from you. As for daily interest, it works fine for a few days, I am lead to believe though the average loan period is around 2 weeks - this kinda puts the Wonga level of interest into the same bracket as the rest of the industry. In fact, borrow for 30 days from Wonga and it costs more than many of the other lenders ... I know Wonga try to claim they are not a payday lender, John and Wonga, you are - and potentially your sliding bar trick makes you one of the more expensive ones to use.

    'we offer an occasional solution with a clear price for when it suits' - 19 loans in 14 months - no you dont. (still maintain my share of blame)... want an alternative, I met someone who borrowed from Wonga for 11 months straight, borrowing a higher amount each time (will come back to this).

    'less than a quater have used a payday loan' - that isnt a good stat John! Clarify maybe?

    Again with the car issue you are using the theory of only borrowing for a couple of days, and no doubt you would use an example figure of 100 pounds to re-iterate your minimal interest. Please John, could you perhaps quote if someone borrowed 450 pounds to pay off another payday loan debt, for say 16 days - I can tell you, its over 100 pound.

    I think John you really really need to explain your companies technology and data collection processes clearly ... I believe you use a thousand bits of information to make you decision, because you lend objectively and only to those who can afford to repay their loans quickly - so again, does that include 19 loans in 14 months. I will go back to the person I mentioned earlier, she borrowed 400 pounds, then repaid, then borrowed again for 11 months straight. Each and every single month between the two parties allowed for higher loans before her final loan just shy of 1000 pounds pre interest - whats your charges for 30 days on that John? Technology, data collection, thousands of pieces of data, yet someone could come back month after month borrowing higher amounts without any questions being asked - John, is this responsible lending? Please justify if you believe it is.

    I remember my last loan, all 810 pounds of it, before Wonga finally responded my loan jumped to well over 1500 pounds after your company added over 10 pound a day in interest, compounded or not, you would have taken me for a fortune - I hope this has now changed!!! Also another point you might consider, some of your rivals actually froze the interest immediately after I defaulted, before I even asked for help, although they did twice in writing suggest I paid the loan and borrowed a smaller amount as a long term solution to my crisis !! So perhaps you are not so much higher than the rest of the industry after all -I wont even go into Wonga selling my loan to a debt collector without informing me John, I know that was a bit of a sore issue for Wonga.

    To people reading this I understand it might come across a little arrogant, like I am just wanting to have a public pop at Wonga for point scoring but I wish to make one thing clear (as well as my own blame). Payday loans ruined me, absolutely ruined me and it sickens my stomach when I see the massive expansion projects of the industry, I talk to people to this very day whose lives and the lives of their families have been ruined by the same issues - Wonga were not the worse to deal with out of the dozen, probably third worst on my list. The APR is miss-leading and I would recommend people look at the real issues, rollover loans etc before bothering with APR's.

    John, you say you are out there and not lurking in the shadows, in which case I am sure you will have no problems responding to the issues I have raised here (and others I have failed to mention yet). Feel free to comment here, or write another article here (subject to approval from Money Saving Expert of course) - feel free to write a response directly to me and I will post it on my Say No To Payday Loans website - I will be more than happy to share the defence of the industry, in an effort to show people exactly what we are all fighting for. This is your article, the next move is yours.
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