MSE News: Wonga: Payday loans 'do wonders' for your credit rating... really?

cepheus

The wreckage of pay-day loan companies

lankeela

I would just point out that those of us who use payday loans have usually exhausted all the other avenues and provided they are used as they are meant to - i.e. a short term advance paid back on payday then they do what they say on the tin. Most of us have such poor credit ratings anyway by the time we need one that we wouldn't get a bank loan or credit card from anyone so credit ratings don't really matter. What does matter is having the cash when you really need it. Don't think anyone would take one out unless it was really necessary. If any of the critics are willing to lend me a few quid for less interest I'd be happy to hear from them.:)

[Deleted User]

lankeela wrote: »

Don't think anyone would take one out unless it was really necessary.

Although the lady on here who wanted to fund a birthday party for her one year old with a PDL does spring to mind....

afly

You make good points lankeela but these companies must not be allowed to paint their lending as good for credit history. It is clearly false

MacMickster

This type of "mistake" by Wonga, trying to suck in those who want to improve their prospects of getting a mortgage or mainstream credit is, in my opinion, criminal.

Almost by definition, PDL companies will only get business from those who have previously not been good with money. This type of advertising is akin to a loan shark who pretends that their "service" offers a way out for the desperate, while actually ensuring that they will remain the only lender available to their customer, trapping them into a cycle of debt.

The friendly and happy Wonga pensioners seen before the start of sponsored TV programmes, and now sponsorship of a Premier League football club all serve to make them appear a mainstream choice of lender, rather than a lender of absolute last resort.

Yes Wonga and their ilk can make a case that they provide a valuable service which could actually save the financially astute some money in some circumstances, but in practice it is not the financially astute that they are trying to attract as customers, otherwise they would operate the same credit checks as mainstream lenders and turn down those who are likely to have difficulty in repaying their loans. They, like loan sharks, want their customers (the poor) to roll over loans at extortionate rates of interest so that they permanently impoverish themselves whilst the PDL companies make fat profits from them.

pelirocco

Rafter wrote: »

Taking out any pay day loan says either:

I'm maxed out on my credit card and overdraft and my bank won't extend it.

Or.....

I'm so badly organised that I can't arrange an authorised overdraft during banking hours so have to resort to Wonga's 24/7 service.

Either way this has to be negative for your credit rating.

As a society we have to ask ourselves whether Wonga and their like provide any useful service or actually whether their 'profits' are actually losses from parents, friends or other financial services companies who have to bail Wonga customers out when inevitably they get into difficulty.

The 'minority' of customers who genuinely benefit is so small in my view it doesn't justify the damage being caused to the majority and any lending whether the customer has to pay back more than twice what is borrowed when measured over a year should be banned. i.e. No APR over 100%

R.

I would guess that a lot people who take out PDL have no access to other credit , extending or arranging an overdraft with their bank is not an option for an awful lot of people .

I'm not defending the use of PDL , although I can see the high APR rates are a little misleading , there is no business sense in lending out small amounts and just charging a high street lending rate , these high APs are calculated including an arrangement fee .

Debt is a very difficult trap get out of , especially if you dont generate an excess of income over expenditure