'Best-buy payday loans?' blog discussion

tagq2

Discogod wrote: »

how is this different to recommending credit cards or your advice on getting the best mortgage for your situation?

(1) Typical circumstances of client;

(2) Willingness of provider to offer loan;

(3) Harshness of punishment for late payment.

worried_jim

PAYDAYLOAN wrote: »

I WAS OBTAINING PAYDAY LOANS AT 15! For me it really was like a drug! I am now in default with over 35+ different Payday Lenders and counting (As letters arrive!) and it’s been like this since i was 15 I ran away from home, had no money and a GPRS enabled phone found quickquid entered every detail correct bar my dob entered as 30/11/1980 and was approved despite being 15 borrowed from some other company to pay them back could have been cash genie not sure and the rest is history!. By far the best if you fell in financial crisis for me I believe is Quickquid as they freeze charges as soon as you default meaning the debt stays a relatively low amount Mine went to £490 after a £400 loan. One off the worse I have encounted was 247 Moneybox I think I owe them over £1500 for £300 loan and then they took £20 off for a chaps transfer! There’s a 0% interest offer for your first payday loan with instant loans direct for 8 days. The market is massive I am only 18 now and in over £35000 off debt thanks to payday loans, i know it’s my fault but I had nothing in the first place I was kid still !!!!!!! Every time I saw approved and the money got transferred i got excited! And now i can’t get any more! cant keep to my arrangements! Have 3 CCJS in a 1980 DOB and I was born 1992! and the worst bit about it I cannot get any help because I committed fraud without even knowing it! Cant go bankrupt, cant enter a debt management plan.

Don't worry about the fraud- go bankrupt. Get free advice now www.payplan.co.uk

melancholly

i think this actually is quite tricky...... the reality is that people will use them so some kind of guidance makes sense. however, there will be plenty of people who will see a guide as an endorsement of them, much like the guide to student finance is seen by some as being supportive of the new fees and loans. my personal take is that providing clear information on 'good' and bad points can only help - giving all the potential concerns and alternatives has to be important (as could a link to general moneysaving/budgeting). telling people what these loans involve is not the same as encouraging people to take them and may often do the exact opposite.

this is one of those situations where you'll probably be damned either way. almost all moneysaving guides have moral questions attached - some argue that the cheap flightchecker encourages people to take extra holidays which is bad for the environment (clearly not its intention!). this might seem more difficult than other areas, but it's not as if all other guides from student finance to PPI reclaiming have been published without objections..... it's just a slightly darker shade of grey.

Eco_Miser

If you mention any of them by name, they are going to treat that as an endorsement, "as seen on Money Saving Expert", whatever you actually say about them.
However I think you should definitely say what interest rate, and other conditions, the best buy is, even if you don't state who the best buy is. Hopefully, that would help steer potential borrowers away from the worst buys.

Errata

By all means develop a toolkit that people can easily understand and use wisely when considering taking a payday loan. Mentioning names is not sensible, your words will be chopped, cut and used out of context by payday loan companies - and others - in exactly the same way as critic's reviews of palys/films/theatre/books are.
You use the word 'safe' a number of times. This indicates very strongly that payday loans are inheritantly unsafe and any guide should place great emphasis on that.

Avocado

Martin a person can not be everything to everyone all the time. To try to do so (as many MPs have found) weakens that persons position on anything he/she does really believe in and makes them appear implausible and shady. If you think about someone you hold up as a hero, lets use Nelson Mandela for an easy example, they are probably held as a hero because they did not try to be everything to everyone, they had a point and they stuck to it. In fact the more they stuck to the side of what they felt was right in the face of pressure the more likely they are to be thought heroic, like Mr Mandela in jail.

Some things which people wish to avoid can be the right course of action (going to court about a debt for example). Other things people don't avoid can be more harm than good and payday loans are one of them. You wrote yourself that borrowing £100 at Wonga APR would result in more than the US national debt in 7 years! You also wrote the counter argument that Wonga isn't meant to be a 7 year long strategy, but I've got debts that old and I'm not going to be the only one on MSE who has. Thankfully none are over $14 trillion USD.

Recommending payday loans is worse than recommending gambling. I'll use an example.
John receives the advice "only gamble what you can afford to lose" and he places a £300 bet on a football match. He loses and is £300 poorer.
Jane receives the advice "only borrow what you can pay back" and needing a car repair she borrows £200-and-something, meaning £300 to repay on payday. But before payday Jane is taken ill with an unpredictable flu bug and takes 2 days off work to recover. She is short the money to repay and so rolls it over. Next month she needs to find £300-and-something. Work have a bad month and cut her hours. Next month goes well but the debt is now out of her reach to repay and growing fast. Before long Jane owes a four figure sum and registers at MSE to post on the DFW board in despair.
John has gambled a flat rate, a rate he already had, on one specific sporting outcome. In the second the final whistle is blown the fate of John's money is decided. Jane gambled on what she could not know, that she would definitely be able to pay that money back and Janes gamble is tested over several days until payday and even longer if that first payday doesn't clear the bill.

This is why payday loans are exploitative and worse than gambling. The people who takes out payday loans do so honestly believing they will be able to repay the money and it will be fine. But they are also people with no savings, no other realistic sources of income, no cushion against the simplest of things (like flu or a garage bill). The evil of payday loans isn't when they work, it's when something else crops up. Something unpredictable. By the very definition of unpredictable it means taking a payday loan can never be actually safe.

The only way you could take out a payday loan and be safe would be if you didn't need it. If you already had the repayment money. People do borrow from other sources in this way, but not from payday loans. One example is stoozing where people borrow money at 0% APR from credit cards, invest it in savings and make a profit, before repaying in full. No one is doing that with payday loans. They are borrowing money they need to pay for a shortfall in thier figures caused by income and essential outgoings not matching. Then next month trying to find an even higher figure from their income, and they still have essential outgoings. The whole set up is a recipe for disaster and the payday loan model of lending doesn't make much profit without a segment of it's clients failing to repay in full on the day.

They are a bad, bad thing and the people they hit are the ones who can least weather it. I think you should focus on promoting the positive ways to live within ones means and the least negative ways to avoid and resolve debts. Not on how to take the biggest and most dangerous gamble of your financial life just in the name of getting by.

MSE_Martin

tagq2 wrote: »

How about a 'best-buy loan sharks'? I mean, like drugs, people are going to use them anyway, so it's best to keep potential customers informed... and to push for threats and beatings to be well-regulated.

MSE already have a habit of ranking on figures rather than on facts: e.g. bank X may get ranked higher for some high-paying bond even though actually signing up might involve such hassle and delay that you've lost any bonus over the second best. This doesn't matter too much when you're dealing with saving or with large, long term loans for people who have demonstrated financial stability.

But when you're talking about the kind of person a PDL is targeted at, any comparison is necessarily far more complex. 1000% vs 1200% APR won't matter as much as: what kind of fines if you're a day late? do they make a habit of trying to take payments multiple times, against OFT guidelines? do they ignore what is not in writing?

Anyway, if you're going to go down the route of full, responsible advice, then you need to put PDL at the bottom of the list just before "loan shark". Ask: do you really need it? If it's for an emergency, have you tried a government crisis loan? Otherwise, if it's too small for a high street bank to help you, have you tried a credit union? A government budgeting loan? If it's because you haven't been able to make ends meet, why do you think the solution is short term credit - what are you going to do next month? Create a sufficiently complete "help making ends meet" tool which leads people through the options, not a single page which clueless people will find when they put "which best pay day loan company" in Google.

I'm not sure whether you meant to sound as rude as this does. Did you actually read the blog - you describe almost entirely what the plan is. 90% of the piece is about alternatives to payday loans another 5% is about 'if you do get a payday loan how to do it sadely' the question is whether we also include actual best buys as the other 5% (ok i know if we dont then i've only got 95% but you have my point) - and even we do the blog states it won't be purely on rate.

Perhaps you should've actually read it before this relatively unhelpful rant.

jamesd

Avocado wrote: »

But they are also people with no savings, no other realistic sources of income, no cushion against the simplest of things (like flu or a garage bill). The evil of payday loans isn't when they work, it's when something else crops up. Something unpredictable.

This is where payday loans are particularly useful. They can provide people with no other or no better resources a way to handle the unexpected events. Get rid of payday loans and they are left more vulnerable because a useful option that could have let them deal with a situation is gone.

BohemianCoast

Obviously I haven't seen the final article. But the problem with payday loans is that they're used by people who have absolutely no other borrowing cushion at all. So despite the fact that I can imagine circumstances when it would be sensible to use them, as you've outlined, I'd like to see a really strong emphasis on the 'how to make sure you only ever have to do this once, even if it means spending the next month as a vegan who doesn't go out at all and spends their evenings listing goods on eBay, so that your money will last the entire month next time'.

tagq2

MSE_Martin wrote: »

I'm not sure whether you meant to sound as rude as this does.

Sometimes I structure or phrase things in such a matter-of-fact way that the message I end up communicating seems to be very different from the message I intended. I also have a bit of public school "they respect you iff they challenge you to do your best" - I know this isn't always particularly elegant. Apologies if you took my words as hurtful.

Did you actually read the blog - you describe almost entirely what the plan is.

Yes. I wasn't arguing against all your plans - I was answering the general question, "should MSE include them [and how]?" I'll try to explain the message behind each of my paragraphs:

1st para: There is an assumption that use of PDL companies is inevitable. If a dangerous activity is going to be undertaken then many would argue that it should be well regulated rather than outlawed. With a bit of tongue-in-cheek reductio I suggested that the same argument could be used for loan sharks.

From what I understand, your philosophy involves what you term an "adversarial consumer society" of contracts carefully written and read. So you would perhaps draw the line below PDLs but above loan sharks, argue that because one already operates outside the law and with the threat of force from its own men it is entirely different from the other, and regard my comparison as obtuse. But in a more recent post you recognised that some people are too vulnerable to be subject to such a Wild West approach. I argue that prospective PDL clients are (as others have discussed above) almost certainly in this vulnerable position - not by virtue necessarily of well-defined disabilities, which I regard as merely one of several reasons why people deserve support and protection. I would therefore suggest that a PDL company has no place in a functioning society and that, from a moral perspective, it is closer to a loan shark than, say, to a high street lender.

But PDL companies have recently gone through a cycle of positive reinforcement, their popularity and promotional efforts further legitimising their activity. You say that "a few times" a PDL is a good move - exactly the same statement applies to a loan shark if your aim is to simply have enough cash by some date to pay for something / avoid some charge. Providing you can be sure you can pay back on time. I suggest that a late payment marker plus moderate bank charges (as someone notes, Clydesdale's charges aren't typically quite that punitive) - a joint kick up the bum to get your finances in order - might be a lot healthier than the "now I don't have to worry for another fortnight!" mistake of a PDL.

and even we do the blog states it won't be purely on rate.

2nd/3rd para: reinforcing the above - giving examples of tricks PDL companies seem to perform and explaining why it is particularly important for prospective PDL clients that they know what the companies do. Also suggesting that the "rank by rate" approach of some MSE articles is a bit too simplistic. I know it is difficult to rank customer service.

I understand that "figures rather than facts" could be taken to mean that figures aren't facts: the context hopefully made it clear that I was referring to figures implying too broad conclusions. For example, your very useful "Top Savings Accounts" / "best buys" page is actually "Top Savings Accounts by Rate". When I see "top xyz" I hope to see a short form where I can rank what is important to me and be delivered a customised list - for example, I care more about unlimited free withdrawals than a 0.05% bonus.

So, 4th para: to suggest an interactive tool which leads people through the options available to them rather than having a huge amount of information on one page - especially not sorted in a way useful primarily to the savvy consumer, which PDL clients almost certainly won't be.