Cashback on short term loans - what are the negatives?

Robbie_S

Hi guys,

I've had a quick search for this, but of course if it's been posted elsewhere, please point me in the direction.

Basically, I just noticed that some short term loan companies (e.g. Sunny) are offering fairly hefty cashback on Topcashback (in Sunny's case, £50.50). Using the calculator on their site, if you borrow the minimum amount from them (£100) for the minimum time (3 days) you would only pay them £2.89 interest. This is a (fairly easy) profit of over £45, providing it tracks, which definitely appeals.

Some of the others it wouldn't work for, but Wonga looks like it would, too, which might be another £40 or so.

Is there anything I'm missing? Does taking out a loan with these companies affect your credit rating significantly? Or is it just a fairly sensible way (as long as you pay it back) of making a few quid?

Thanks,

Robbie

System

Cashback is never guaranteed, also payday loans can have a detrimental affect on your credit score.

Definitely not something I would do.

whitegoods_engineer

So you think that a payday loan company will pay YOU for borrowing money????

Dream on!

SeduLOUs

Payday loans are notoriously bad for your file, but if your credit rating is far from perfect anyway then it might not do any (more) harm as long as you are ABSOLUTELY CERTAIN you can pay it back on time.

I can't see anything in the terms about having to borrow a minimum amount or for a minimum number of days, so seems to be based on whatever the minimum is that the company in question will offer.

I'm waiting another 2 years for a default to drop off my file, so might actually try this with Wonga...

InsideInsurance

whitegoods_engineer wrote: »

So you think that a payday loan company will pay YOU for borrowing money????

Dream on!

They do indirectly, they are paying affiliate marketeers to promote their products. In cashback sites cases like Quidco they decide to give you the money they earn as the marketeer.

As the OP has said, with some of them the amount of marketing money they pay out is below the amount of fees/ interest they charge and so you can be "in profit" for taking out the loan.

The two negatives as others have pointed out are:

1) Cashback isnt guaranteed so you may end up with just a bill to pay to the lender

2) Having payday companies on your CRA file shoots your record to pieces. They will stay on their for 6 years but their impact does diminish overtime even whilst still there.

Nearly 4 years ago I did the identical thing, the margins were even bigger back then and made a few hundred pounds out of it. I was lucky in that all commission tracked no issues and was paid out. Plus I was at a stage where I knew I didnt want any new credit in the next few years so was willing to take the hit on the CRA file.

fatavril

I work for an independent mortgage adviser and thanks to the new MMR regulations that came in to force in April this year, your whole credit history and spending history is taken in to account when applying for any kind of high street borrowing.

We've had several people refused mortgages because they have or have had, pay day loans at some point, regardless of loan amount, date of loan, settled, length of time etc etc

Also same goes for online gambling or anything deemed risky by the mortgage lenders. If they see stuff like payments to any kind of bingo sites or betting sites showing regularly on your bank statements then they may refuse your loan.

Robbie_S

Thanks all!

This was kind of as I expected, but good to have it confirmed, really appreciate it. Don't want to risk the credit rating at the moment, so will have to find another way to make £100...

Interesting about the MMR regulations, too.

Robbie

smifffy1989

I did this a few years ago and it paid off! I have since been approved for a mortgage (Jan 2013).

the_matrix

You just won't get the cashback and will have paid interest at a high rate for little or no return.

Negative investment.

RUN, RUN, RUN.

SeduLOUs

the_matrix wrote: »

You just won't get the cashback and will have paid interest at a high rate for little or no return.

Negative investment.

RUN, RUN, RUN.

We're talking about doing it through 3rd party cashback sites like TopCashBack where this has been verified by many forum users to work and be paid successfully.

Yes, sometimes things don't track, but I've personally never had any issues with TCB and worst case scenario you are only gambling with £3, so I am just debating whether the likely £45 profit is worth the credit file mark.