It makes me so angry...

fiendishly

I just clicked on this when entering an online competition...
http://www.paydaystore.co.uk/charges.htm
The apr is given as 1355%!
I'm amazed this is legal. How are they allowed to get away with it? :mad:

BFG_2

Another POV on this would be ....

Remember these are very short term loans - less than 30 days. Think how much it costs the company to process the paperwork, their other expenses and the costs of 'bad' debts etc.

I guess the danger is that if the debt is rolled over for another 30 days etc it soon becomes quite large. In addition it is probably only used by thise who can afford it least and have no friends or family; then again one suggestion for them is that maybe they should join a credit union instead.

I guess it's comparable to a pawn shop - anyone know their typical APR rates??

Dronegc_2

I thought interest rates that high were illegal? Its shocking that people can get away with it.

fiendishly

BFG off topic but I just wanted to say I love your (you're) sig. LOL

Don't you think that, even allowing for paperwork and admin. costs etc. for a short term loan, 1355% is a bit much? I agree that you could reasonably expect the rate to be higher but that much? Scares me, frankly.

lipidicman

BFG for your sig:
Loose: not tight, wobbly. Lose: to misplace

the most common one that, apparently

Stonk

Example (a real one). Borrow £80 for 28 days, pay back £100. Doesn't sound too unreasonable, does it? £20 for the paperwork isn't much, when a bank will hit you for £35 to send you a standard letter. But the APR works out at 1733%.

Another example. Lend a friend a quid. They repay £1.01 the next day. The APR is 3678%.

This effect happens when the time period is short, or the fixed non-interest fees (which have to be included in the APR calculation) are large in comparison to the amount borrowed. If it were made illegal, small loans would no longer be a viable business.

BFG_2

Stonk wrote:

Lend a friend a quid. They repay £1.01 the next day. The APR is 3678%.

The power of mathematics.
I think stonks calcs show how short term loans have a very high APR.

The real danger is when the 'borrower' doesn't repay and the 'lender' rolls the debt over and starts charging interest on the interest. Can someone do the calc for not repaying for say six months.

Reminds me a bit of taxation - you work and pay tax on your earnings, invest the rest and pay tax on any interest earned, then spend interest on a car and pay VAT and car duty......taxed 3 times on the same money!!!!!

Then dealer pays tax on profits from you!!!!!!!