To cap or not to cap, that is the question? (Worst offenders? Highest apr seen?)

learning_to_drive

Hi,

As the title says, why isnt there a cap on APR's? Why are companies allowed to charge absurdly high rates to poor customers who struggle anyway?

Surely there has to be a cap of 50% apr to prevent unecessary milking of cash from poor families? I appreciate that provident and others provide a service of credit that otherwise wouldnt be available to hard up families, but is there really a need for their high apr's? Can they justify such rates?

I appreciate that the people in debt do have themselves to look at and not blame a company that has to make money, but surely people must see that these APR's are excessive to say the least?

Also, what about the highest APR seen? From memory 'logbook loans' operate around 289% APR, what about others?

Lets name and shame these companies.

learning_to_drive

from logbookloans.co.uk

Typical 336.6% APR


Bargain!

learning_to_drive

from cornershoploans.com

TYPICAL EXAMPLE: £150.00 over 6 Months = £36.25 Per Month. Total Payable = £217.50 APR 280.4%

Dr_Hook

How does 1,734.1% APR grab you? :eek: :eek: :eek:

Click here for the proof (click the our charges button at the top).

The Payday Loan Company take the term "daylight robbery" and make it their own.

Gits.

Dr_Hook

Another bunch of highwaymen: My Payday Loan

After going to great lengths to say that APR is not an effective measure of the cost of a short-term loan (the site likens it to using a thermometer to see if it's raining), you eventually find out that the effective APR is 1355% :shocked:

chimaera_2

How about 2339.30% APR :eek: :eek: ,

from yet another payday loan company.

see http://www.unclebuck.tv/faq.htm for proof.

learning_to_drive

Surely this should be illegal? Those sort of figures are absurd!

Dr_Hook

It makes me feel better though - I thought Cahoot were ripping me off at 19.9% APR (they've hiked it umpteen times since I took the loan out - think it was originally around 10%). I'm paying around £100 interest per month on £7,500 - at uncle buck's rates I'd be paying £2,250 every month in interest :eek: :eek: :eek:

Scandalous.

Crown

This has been discussed so many times on here and the concenus seems to be that yes they are a total rip off but do provide a service and most of these "loans" are meant to be short term arrangements were you possibly cash a cheque why you are are waiting a few days for funds to arrive.

If you had no money at all and was going to go hungry, get thrown out of your property and you and the kids were going to be one the streets and someone you knew offered you the option that they would lend you £500 to stop this but in a weeks time you would have to pay them back the £500 plus a £50 fee for there hassles a lot of people would jump at the chance.

In most cases when people are desperate they do not look at the percentage they are paying. Most people just think well £50 gets me out of the hole at the moment and I get paid soon!

I hate these companies and this is one reason that inspires me to be debt free. THe lenders are laughing all the way to there own bank! If we all had been so wonderful with mathematics and looked at the percentages im sure a lot of us would not be in so much debt.

We Live & learn!

Dr_Hook

APRs should be taken with a pinch of salt really - although it is interesting to look at the higher ones out there. Thing is, what one of the lenders above says about APRs being inadequate as a measure of short term does contain an element of truth.

The OFT themselves say that APRs should only be used to compare like for like loans, and even then 2 companies using the same data could come up with different APRs as the statutory equation for APR can solve for multiple values.

When things are so complicated that even financial mathematicians/statisticians can't be consistent, what chance does joe public have?

I've been trying to track my DFD using my own spreadsheet & have looked up the equations for calculating monthly interest rates from APRs/EARs, but I still can't accurately predict how much interest will be charged due to differences in card lenders' policies such as when interest is added (i.e. at the statement date or transaction date), whether interest is charged on last month's interest, etc, etc. Then add in factors like some of the balance is at x promotional b/t rate, and some at y rate & things get really confusing!

I'd almost have better luck asking a magic 8-ball :rolleyes: :rotfl:

Ultimately these companies do provide a service & most folk in a pinch would borrow £100 now to get themselves out of an immediate hole, even if it means paying £130 back a month later, however much they might not like it.