Pay Day Loans = Legallised Loan Sharks...?
Discussion
ianash said:
I was an advisor at the CAB for a while and met the probable recipients of these loans. They have absolutely no where else to go. Often they have used and abused Govt hardship loans and their friend's and family's have been borrowed from and not been repaid at previous crisis points. Where else can these people go?
The Workhouse?Corsair7 said:
i bet they are pretty sharp at passing bad debt on to more aggresive collection tyoes though....
I feel like I've said this on NP&E before, but The Sopranos wasn't real.What actually happens in reality land is they send a 'debt recovery agent' to come around and try to work out a payment plan. You might end up paying £5 a week every week for about ten years if that is all you can afford, but if you can't keep that up then they bring out the big guns and...
...take you to court. It is very civilised really.
Frankeh said:
You borrow £100 then in a month you pay back £125. It's not f
king rocket science. Anyone can see that's a ste deal, but you're paying for the convenience.
And it's the best deal they have on the table. Clearly they would rather borrow £100 from family or friends if they could. So basically these people, call them feckless or unfortunate, are those who cannot even obtain finance from their own family or friends .. not exactly the sort of people your high street banks will want to touch with yours. Also Wonga are sponsoring some cracking shows on Five USA, so in a way something good has come out of this.king rocket science. Anyone can see that's a ste deal, but you're paying for the convenience. I normally think you should be able to work out an arrangement without restrictions, but in this case some people need protecting as "victims" here might be innocent, e.g. the person taking out the loan may have children who suffer.
I would
1) Have a maximum rate of interest (say about 50%).
2) Allow a separate "Administration fee" when the loan is taken out (up to about 25% of the value of the loan).
This would mean that if you want a short term loan of e.g. £500, paying back £550 2 weeks later it is possible, but it will probably be done as £500, £46 administration fee, interest of 50%, and if someone can't pay it back straight away it won't compound ridiculously so they will always be owing money. If your circumstances change and you lose your job and can only afford to pay back £50 a month, then you will clear the loan within a year or so.
I would
1) Have a maximum rate of interest (say about 50%).
2) Allow a separate "Administration fee" when the loan is taken out (up to about 25% of the value of the loan).
This would mean that if you want a short term loan of e.g. £500, paying back £550 2 weeks later it is possible, but it will probably be done as £500, £46 administration fee, interest of 50%, and if someone can't pay it back straight away it won't compound ridiculously so they will always be owing money. If your circumstances change and you lose your job and can only afford to pay back £50 a month, then you will clear the loan within a year or so.
purplepolarbear said:
I normally think you should be able to work out an arrangement without restrictions, but in this case some people need protecting as "victims" here might be innocent, e.g. the person taking out the loan may have children who suffer.
I would
1) Have a maximum rate of interest (say about 50%).
2) Allow a separate "Administration fee" when the loan is taken out (up to about 25% of the value of the loan).
This would mean that if you want a short term loan of e.g. £500, paying back £550 2 weeks later it is possible, but it will probably be done as £500, £46 administration fee, interest of 50%, and if someone can't pay it back straight away it won't compound ridiculously so they will always be owing money. If your circumstances change and you lose your job and can only afford to pay back £50 a month, then you will clear the loan within a year or so.
And who do you think will then lend. I would
1) Have a maximum rate of interest (say about 50%).
2) Allow a separate "Administration fee" when the loan is taken out (up to about 25% of the value of the loan).
This would mean that if you want a short term loan of e.g. £500, paying back £550 2 weeks later it is possible, but it will probably be done as £500, £46 administration fee, interest of 50%, and if someone can't pay it back straight away it won't compound ridiculously so they will always be owing money. If your circumstances change and you lose your job and can only afford to pay back £50 a month, then you will clear the loan within a year or so.
These people are unlendable to, nearly. It's difficult to get the money off them if they won't pay. So the risk is priced accordingly.
It's simple, the cost is laid out very clearly. No issue.
purplepolarbear said:
If someone can't pay it back straight away it won't compound ridiculously so they will always be owing money. If your circumstances change and you lose your job and can only afford to pay back £50 a month, then you will clear the loan within a year or so.
I suspect that person would just go to another lender and borrow the new amount to pay the previous loan off and we are in the same situation all over again.They had a phone-in on the radio about these a while back.
As you would expect most callers were very anti.
However a builder phoned up and said he had bid for a piece of work that required him to buy the materials up front, as things had been very slow he didn't have the money and the bank wouldn't lend it to him, presumably because times had been tight for him recently.
he got a loan from one of these companies, bought the materials, finished the job, got paid and settled it.
He couldn't praise them highly enough.
As you would expect most callers were very anti.
However a builder phoned up and said he had bid for a piece of work that required him to buy the materials up front, as things had been very slow he didn't have the money and the bank wouldn't lend it to him, presumably because times had been tight for him recently.
he got a loan from one of these companies, bought the materials, finished the job, got paid and settled it.
He couldn't praise them highly enough.
anonymous said:
[redacted]
Spot on Tonker, I did find the same. But the point I was making, was that feckless or otherwise, people need access to money they don't have. It may be a result of bankruptcy, benefit withdrawal or a thousand other reasons - they believe they absolutely need access to extra money. I believe given the credit history of some of the people I dealt with, they are lucky to get a loan at ANY price. I have not read in any news media of defaulting borrowers being beaten up. So to label these business's as parasites is quite wrong. If the profits were so outrageous, why aren't traditional lenders undercutting them - the answer of course is, that no high street lender would touch this class of borrower with a 50ft pole.Russ T Bolt said:
he got a loan from one of these companies, bought the materials, finished the job, got paid and settled it.
Precisely why these APR figures are meaningless. It all depends on why you need the cash and ultimately only the borrower can decide. For the builder who needs £1000 to pay for materials on a £3000 job and cannot find a soul who will lend to him, well clearly even £250 interest will only make a bearable dent in his earnings.ianash said:
I was an advisor at the CAB for a while and met the probable recipients of these loans. They have absolutely no where else to go. Often they have used and abused Govt hardship loans and their friend's and family's have been borrowed from and not been repaid at previous crisis points. Where else can these people go?
It's not always down to them. I was dealing with the parents of a nasty little toe-rag and they told me that they needed a fair-sized lump sum once to cover damage their kid had caused. They found that no bank would lend to them. They had no credit card, nor bank account come to that. So they went to a loan shark. They phoned him, he came round, gave them the cash there and then, picked an APR that the lender felt reasonable and everyone was happy. He was a school caretaker so wasn't flush but up to them had had a life free of debt. Yet no bank would even consider him.I interviewed the loan shark and he justified his profession by saying, as you did, that people have nowhere else to go. He reckoned that he made less money on a loan than the banks did. They lend to those who don't need the money as such and he took the risks. Mind you, this was before the free-for-all on debt.
A relative of mine fell into bother with some of them, it's been done to death on there, but here goes.
The APR isn't the issue, it's a silly high number but that's more to do with APR's not being a terribly good way to work out the expense of very short term lending.
The problem I have with them is they're second only to maybe credit card companies at enticing people to over-spend and over-borrow - yes, yes, yes people aren't exactly held at gun point but their clients aren't exactly Oxbridge material.
Take this example:
Young guy, 21 years old, first job, minimum wage takes home about £850 a month and is somehow in this day and age trying to make his way in the world.
His fridge breaks down - he's potless with 10 days till payday so left with a choice - eat takeaways for 10 days which he can't afford, go overdrawn without agreement and pay £100 in 'fees' or take out a payday loan for £100 to buy a cheap fridge.
They agree it on the spot because their business model is based on giving money to anyone with an e-mail address and a bank account - he takes the £100 and buys a fridge.
Payday comes and they take £110 - £125 from him.
I don't have a problem with that; it's a high-cost but affordable way out of an emergency.
But that's not the whole story.
For a start about 3 days before he pays back the money he gets a nice e-mail from them "We know life can be hard blah blah blah, you don't have to pay it all off this month, pay us the £10, plus a small fee and we'll forget about it this month"
Then is he does the next months charge is £150 because he has to pay the interest for the whole month, but he can always role it over again if he wants.
Without much regard to his income they'll keep giving him more and more if he wants it.
Plus they've sold his info to the other 100 or so providers and they're bombarding his inbox with constant messages "have £800 in your account in 15 mins or less".
The APR isn't the issue, it's a silly high number but that's more to do with APR's not being a terribly good way to work out the expense of very short term lending.
The problem I have with them is they're second only to maybe credit card companies at enticing people to over-spend and over-borrow - yes, yes, yes people aren't exactly held at gun point but their clients aren't exactly Oxbridge material.
Take this example:
Young guy, 21 years old, first job, minimum wage takes home about £850 a month and is somehow in this day and age trying to make his way in the world.
His fridge breaks down - he's potless with 10 days till payday so left with a choice - eat takeaways for 10 days which he can't afford, go overdrawn without agreement and pay £100 in 'fees' or take out a payday loan for £100 to buy a cheap fridge.
They agree it on the spot because their business model is based on giving money to anyone with an e-mail address and a bank account - he takes the £100 and buys a fridge.
Payday comes and they take £110 - £125 from him.
I don't have a problem with that; it's a high-cost but affordable way out of an emergency.
But that's not the whole story.
For a start about 3 days before he pays back the money he gets a nice e-mail from them "We know life can be hard blah blah blah, you don't have to pay it all off this month, pay us the £10, plus a small fee and we'll forget about it this month"
Then is he does the next months charge is £150 because he has to pay the interest for the whole month, but he can always role it over again if he wants.
Without much regard to his income they'll keep giving him more and more if he wants it.
Plus they've sold his info to the other 100 or so providers and they're bombarding his inbox with constant messages "have £800 in your account in 15 mins or less".
P-Jay said:
A relative of mine fell into bother with some of them, it's been done to death on there, but here goes.
The APR isn't the issue, it's a silly high number but that's more to do with APR's not being a terribly good way to work out the expense of very short term lending.
The problem I have with them is they're second only to maybe credit card companies at enticing people to over-spend and over-borrow - yes, yes, yes people aren't exactly held at gun point but their clients aren't exactly Oxbridge material.
Take this example:
Young guy, 21 years old, first job, minimum wage takes home about £850 a month and is somehow in this day and age trying to make his way in the world.
His fridge breaks down - he's potless with 10 days till payday so left with a choice - eat takeaways for 10 days which he can't afford, go overdrawn without agreement and pay £100 in 'fees' or take out a payday loan for £100 to buy a cheap fridge.
They agree it on the spot because their business model is based on giving money to anyone with an e-mail address and a bank account - he takes the £100 and buys a fridge.
Payday comes and they take £110 - £125 from him.
I don't have a problem with that; it's a high-cost but affordable way out of an emergency.
But that's not the whole story.
For a start about 3 days before he pays back the money he gets a nice e-mail from them "We know life can be hard blah blah blah, you don't have to pay it all off this month, pay us the £10, plus a small fee and we'll forget about it this month"
Then is he does the next months charge is £150 because he has to pay the interest for the whole month, but he can always role it over again if he wants.
Without much regard to his income they'll keep giving him more and more if he wants it.
Plus they've sold his info to the other 100 or so providers and they're bombarding his inbox with constant messages "have £800 in your account in 15 mins or less".
So if he has discipline then he's fine.The APR isn't the issue, it's a silly high number but that's more to do with APR's not being a terribly good way to work out the expense of very short term lending.
The problem I have with them is they're second only to maybe credit card companies at enticing people to over-spend and over-borrow - yes, yes, yes people aren't exactly held at gun point but their clients aren't exactly Oxbridge material.
Take this example:
Young guy, 21 years old, first job, minimum wage takes home about £850 a month and is somehow in this day and age trying to make his way in the world.
His fridge breaks down - he's potless with 10 days till payday so left with a choice - eat takeaways for 10 days which he can't afford, go overdrawn without agreement and pay £100 in 'fees' or take out a payday loan for £100 to buy a cheap fridge.
They agree it on the spot because their business model is based on giving money to anyone with an e-mail address and a bank account - he takes the £100 and buys a fridge.
Payday comes and they take £110 - £125 from him.
I don't have a problem with that; it's a high-cost but affordable way out of an emergency.
But that's not the whole story.
For a start about 3 days before he pays back the money he gets a nice e-mail from them "We know life can be hard blah blah blah, you don't have to pay it all off this month, pay us the £10, plus a small fee and we'll forget about it this month"
Then is he does the next months charge is £150 because he has to pay the interest for the whole month, but he can always role it over again if he wants.
Without much regard to his income they'll keep giving him more and more if he wants it.
Plus they've sold his info to the other 100 or so providers and they're bombarding his inbox with constant messages "have £800 in your account in 15 mins or less".
Seriously, people need to take some responsibility.
I have recently started a short term loan/cheque cashing service.
Typically, the people who use payday loans are roughly the same people as use pawnshops or illegal moneylenders except that they don't need any goods to pledge or dramas to go through, including REALLY high interest rates.
We've already got some regulars. One's a tradesman. Borrows £100 on Monday, pays £110 the following Monday, then immediately borrows another £100 etc etc. Rolling credit. Suits him. So why not?
(O by the way, if you think you're smart, and want an idea of your credibility, try getting an authority from your bank to cash 3rd party cheques).
Typically, the people who use payday loans are roughly the same people as use pawnshops or illegal moneylenders except that they don't need any goods to pledge or dramas to go through, including REALLY high interest rates.
We've already got some regulars. One's a tradesman. Borrows £100 on Monday, pays £110 the following Monday, then immediately borrows another £100 etc etc. Rolling credit. Suits him. So why not?
(O by the way, if you think you're smart, and want an idea of your credibility, try getting an authority from your bank to cash 3rd party cheques).
Soovy said:
So if he has discipline then he's fine.
Seriously, people need to take some responsibility.
Exactly. What kind of person is he if he can't show some restraint when people offer him obviously bad deals. Seriously, people need to take some responsibility.
Tell him I've got some magic beans for sale if he's really that bad. £100 for 10. Great offer. They can be in his hand in just 14 minutes!
Derek Smith said:
It's not always down to them. I was dealing with the parents of a nasty little toe-rag and they told me that they needed a fair-sized lump sum once to cover damage their kid had caused...
This, Mrs Digga's four-fgure "charity starts at home" campaign this year is a result of a family member in already tight finances having precisely this happen to them.FWIW, in lieu of other funding, I can see a place for pay day lending.
groak said:
I have recently started a short term loan/cheque cashing service.
Typically, the people who use payday loans are roughly the same people as use pawnshops or illegal moneylenders except that they don't need any goods to pledge or dramas to go through, including REALLY high interest rates.
We've already got some regulars. One's a tradesman. Borrows £100 on Monday, pays £110 the following Monday, then immediately borrows another £100 etc etc. Rolling credit. Suits him. So why not?
(O by the way, if you think you're smart, and want an idea of your credibility, try getting an authority from your bank to cash 3rd party cheques).
Good luck.Typically, the people who use payday loans are roughly the same people as use pawnshops or illegal moneylenders except that they don't need any goods to pledge or dramas to go through, including REALLY high interest rates.
We've already got some regulars. One's a tradesman. Borrows £100 on Monday, pays £110 the following Monday, then immediately borrows another £100 etc etc. Rolling credit. Suits him. So why not?
(O by the way, if you think you're smart, and want an idea of your credibility, try getting an authority from your bank to cash 3rd party cheques).
I know someone that took The Money Shop for £5k in unpaid cheques and they've never had a penny back out of him.
anonymous said:
[redacted]
Try to set aside the example I used, I made it up for the sake of having one. Reading through your posts on this thread I take that you don't consider they're doing anything wrong in lending money short term at high interest rates - as I don't.
But you'd have to be stupid to actually use them.
So are they making - I'm guessing by the explosion in lenders in this market huge profits - from exploiting the stupid, and you don't have a problem with that?
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