Discussion
Mate of mine, gone through a divorce, got made redundant and got massive grief from HMRC, Never made bankrupt, but has agreed payments with credit card companys, etc.
He is unable to get any loan, over draft facility, etc, except from payday loan Companies at silly rates of interest.
I have lent him as much as I can, he's paying me back monthly, one his mates also offered to lend him money at 25% interest (therefore not a friend in my eyes)
Now back on his feet, six months in the same job and starting to get back on track, can’t change banks because of past.
My question is: Why if you/were, are on your backside can you not get a "sensible loan" He earns over 50k a year and has spare income. I'd love to know who actually is behind these payday companies. I can understand that if you are going to go overdrawn by say £15 and you get charged £30 it makes sense.
But for " Mr/Mrs Average" why can't someone suggest a scheme that deducts money from your wages, or something like that.
He is unable to get any loan, over draft facility, etc, except from payday loan Companies at silly rates of interest.
I have lent him as much as I can, he's paying me back monthly, one his mates also offered to lend him money at 25% interest (therefore not a friend in my eyes)
Now back on his feet, six months in the same job and starting to get back on track, can’t change banks because of past.
My question is: Why if you/were, are on your backside can you not get a "sensible loan" He earns over 50k a year and has spare income. I'd love to know who actually is behind these payday companies. I can understand that if you are going to go overdrawn by say £15 and you get charged £30 it makes sense.
But for " Mr/Mrs Average" why can't someone suggest a scheme that deducts money from your wages, or something like that.
Steffan said:
Greed is the driving force behind these businesses. Pure unfettered Greed.
but main clientele are not like the OP's mate but the 'Im worth it' types who buy into the 'disposable income' brainwashing and waste money on frivalous things. Often the lender and borrower are a match made in heaven.I worked for a while for a sub prime lender. Backers got a 25% return on their cash, staff had lovely night outs eating in the best places and the idiot punter kept borrowing more.
The CEO cared about little other than bottom line (can imagine a huge PPI bill has hit them)
Some people you just can't help.
Payday loans are for people who have spent the rent money on cider and have a bad enough record that they can't get credit elsewhere. How much would you charge to lend them 50 quid for a week?
It's not a business I could sleep at night running, but if you capped the interest rate chargeable they wouldn't make enough to cover the defaults, it would become impossible to lend to these people and the only remaining line of credit open to them would be loan sharks.
It's not a business I could sleep at night running, but if you capped the interest rate chargeable they wouldn't make enough to cover the defaults, it would become impossible to lend to these people and the only remaining line of credit open to them would be loan sharks.
I am not an IFA but anecdotally it appears that the credit crunch has taught a few banks that it is imprudent to lend to people who are unable to pay their debts.
This USED to be your mate.
It isn't him NOW but unfortunately it takes a very long time for him to change the banks' minds.
The very best he can hope for is to persuade his current account holding bank to give him a personal loan in order to pay off the other (presumably more expensive) loans.
That bank will be most familiar with him and be able to see in real time how his fortunes have improved.
They are more likely than anyone to give him a loan, I suspect.
If they can't then he needs to just save as much as possible and pay off the other outstanding loans ASAP.
Going to a payday lender or "mate" charging 25% interest is a bad idea since you are exchanging one debt for another but with a FAR HIGHER rate of interest.
This USED to be your mate.
It isn't him NOW but unfortunately it takes a very long time for him to change the banks' minds.
The very best he can hope for is to persuade his current account holding bank to give him a personal loan in order to pay off the other (presumably more expensive) loans.
That bank will be most familiar with him and be able to see in real time how his fortunes have improved.
They are more likely than anyone to give him a loan, I suspect.
If they can't then he needs to just save as much as possible and pay off the other outstanding loans ASAP.
Going to a payday lender or "mate" charging 25% interest is a bad idea since you are exchanging one debt for another but with a FAR HIGHER rate of interest.
Any subprime lender is taking a larger risk and need to know what they are doing. Around 2002 too many companies piled into sub-prime as they thought it was easy money. Many got burnt, the reason people tend to be sub prime is they are less likely to pay the money back, therefore a higher risk, as such are charged more.
Payday loans have come into a new space, don't forget the average loan time is around 10 days, and that is it. They can't lend for more than - I think - 3 months in a row. The actual reality of the figures is very different to the APR - for example if you borrow £200 then the charge will be £40, now that maybe over 7 days - this is what makes the APR's look so mad.
Look at the target audience - baring in mind the likes of Money Shop & Cash Converters are doing these loans as well, definately very sub-prime. But only good for very short term loans, they should not be used month in month out - however I suspect that is how the business model has been created, get you on a hook....
Payday loans have come into a new space, don't forget the average loan time is around 10 days, and that is it. They can't lend for more than - I think - 3 months in a row. The actual reality of the figures is very different to the APR - for example if you borrow £200 then the charge will be £40, now that maybe over 7 days - this is what makes the APR's look so mad.
Look at the target audience - baring in mind the likes of Money Shop & Cash Converters are doing these loans as well, definately very sub-prime. But only good for very short term loans, they should not be used month in month out - however I suspect that is how the business model has been created, get you on a hook....
This is purely tongue in cheek and not financial advice or anything like it but:
why don't you borrow the money at say 8% and lend it to him at say 15%?
I think the honest answer, is that you wouldn't probably want the risk. It's the same with lenders, he's your mate and you know him and you trust him and if he goes bankrupt he would probably still give you the money back in future. Lenders don't have that luxury and have overheads too so that is your answer.
why don't you borrow the money at say 8% and lend it to him at say 15%?
I think the honest answer, is that you wouldn't probably want the risk. It's the same with lenders, he's your mate and you know him and you trust him and if he goes bankrupt he would probably still give you the money back in future. Lenders don't have that luxury and have overheads too so that is your answer.
He has already demonstrated that he will not pay money back in full. If I told you I had a mate (you don't know me or him) who had such a history, and who owed me money, what rate of interest would you want to charge him in order to make a loan?
A long time ago I borrowed once from these companies as I had no access to funds to pay a bill, and didn't want to ask friends for help. They don't force anyone to borrow from them.
A long time ago I borrowed once from these companies as I had no access to funds to pay a bill, and didn't want to ask friends for help. They don't force anyone to borrow from them.
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