[News] Wonga - on verge of collapse.

[Raleigh Chopper]

I'm starting up a new loan service as it seems the pay day companies will soon disappear, an opening in the market for a new type of company will emerge.
If anyone is desperate for cash but does not value their life please contact me at Ronnie & Reggie loans, the gentlemen money lenders.
You get a free Barbara Windsor autobiography and a poster of the Queen Mum with every loan over 10k

 

[GOM]

Although I understand your point about APR, plant and car hire are completely different. They have a limited life and need maintenance, cleaning, someone at the hire centre to manage the product in and out. And the hire centres need to be paid for. With money, it's a cheaper call centre and automatic systems, and when the money is returned to them it's the same as when it left.

.and all that is relevant how? do you just want to reduce their profit or ban the product?
Perhaps in the example on their front page if the cost for borrowing £150 for 2 weeks was only perhaps £12 instead of £16.80 would that be OK ? Call centres have to be paid for, websites have to be paid for, back room staff, lawyers, financiers have to be paid for. The money they borrow to lend has to be paid for.
They tell you what the COST is up front, if you don't like it don't buy it.

 

[drew]

The majority of people who use these companies do so and repay on time. If they didn't the companies wouldn't exist. Let the nanny state take over and ban this service because a few abuse it.
Back to the loan sharks.

If that's the case then why do they need to charge such exorbitant (and exploitative) interest rates?

 

[Triggaaar]

.and all that is relevant how?

You were saying we wouldn't complain if charged a fee for the use of machinery etc, so why complain at a fee for the use of money, and I was explaining how it's a very different scenario.

do you just want to reduce their profit or ban the product?

I want to protect the victims that use these companies. Severely limiting the amount they charge offers some protection. It also limits the companies profits, but that isn't the aim.

Perhaps in the example on their front page if the cost for borrowing £150 for 2 weeks was only perhaps £12 instead of £16.80 would that be OK ?

You talk of the examples on their front page being reasonable - that's because regulation has stopped them charging as much as they used to.

Call centres have to be paid for, websites have to be paid for, back room staff, lawyers, financiers have to be paid for. The money they borrow to lend has to be paid for.

Yes, and it's all a lot cheaper than the same for plant.

They tell you what the COST is up front, if you don't like it don't buy it.

And I never have, but these companies prey on those too stupid/desperate to realise.

 

[Return of the Rev]

I'd be happy with a tenth of that percentage, bearing in mind the pitiful amounts the banks are offering these days, even on ISAs!

1/100 of that percentage would be a decent return tbh.

 

[GOM]

If that's the case then why do they need to charge such exorbitant (and exploitative) interest rates?

You have clearly not been reading above, the interest rate APR is totally misleading. The cost for borrowing £150 over 2 weeks on their website is £16.80, an interest rate of 11.2%

 

[beorhthelm]

Although I understand your point about APR, plant and car hire are completely different. They have a limited life and need maintenance, cleaning, someone at the hire centre to manage the product in and out. And the hire centres need to be paid for. With money, it's a cheaper call centre and automatic systems, and when the money is returned to them it's the same as when it left.

money costs something, at least the opportunity cost before considering the cost of defaults. those call centres, IT systems and business overheads are not free either, so the unit cost of a arranging a loan is going to be relativly fixed cost whether its £100 for a week or £1000 for 2 years. £20 on a £100 loan looks alot higher than £20 on £1000, but the way APR is calculated it distorts the impression of that cost.
also if you calculate a mortgage you are probably paying back 50% of the principle but you do so over 25 years so dont notice how much it cost you.

 

[Triggaaar]

money costs something

Obviously.

so the unit cost of a arranging a loan is going to be relativly fixed cost whether its £100 for a week or £1000 for 2 years.

So it would be fairer if they said it'll cost you £16 to borrow the money for a couple of weeks, and then just another £1 per month after that. But they don't do they.

 

[beorhthelm]

Obviously.
So it would be fairer if they said it'll cost you £16 to borrow the money for a couple of weeks, and then just another £1 per month after that. But they don't do they.

that is what they do. they have to show a APR rate for comparison.

 

[Triggaaar]

that is what they do. they have to show a APR rate for comparison.

No they don't. It wouldn't be 1,500% APR if they did.

 

[GOM]

You were saying we wouldn't complain if charged a fee for the use of machinery etc, so why complain at a fee for the use of money, and I was explaining how it's a very different scenario.

No it's not different, just a different price for a different product.

I want to protect the victims that use these companies. Severely limiting the amount they charge offers some protection. It also limits the companies profits, but that isn't the aim.

The companies are the victims of those that do not fulfill their contractual obligations that they signed up to.

You talk of the examples on their front page being reasonable - that's because regulation has stopped them charging as much as they used to..

I have never said reasonable , I merely pointed out the cost of the loan in monetary terms instead of being hysterical about APR.

Yes, and it's all a lot cheaper than the same for plant.

And I never have, but these companies prey on those too stupid/desperate to realise.

So what, as above different product different price. How many people don't return the plant hired.

I am very pleased that you are not

too stupid/desperate

 

[GOM]

No they don't. It wouldn't be 1,500% APR if they did.

Please see my original post on this thread, taken from the Wonga website

Borrow £150 over 14 days
Interest rate 292% pa (fixed)
Total amount payable £166.80
Representative 1,509% APR


So yes they do show it.

 

[dazzer6666]

No they don't. It wouldn't be 1,500% APR if they did.

It would though........as a rough/simple example, charging say £15 (plus any admin fees ?) for a £100 loan for a week requires the APR to be calculated over a year.......so would be 15 x 52 - £780 of interest.

Their fixed rate now seems to be 292% pa

 

[GOM]

It would though........as a rough/simple example, charging say £15 (plus any admin fees ?) for a £100 loan for a week requires the APR to be calculated over a year.......so would be 15 x 52 - £780 of interest.

Their fixed rate now seems to be 292% pa

and there lies the whole point. It is not a one year loan. Looking at the examples shown in their illustration shows that different amounts over different times using the same fixed interest rate produce different APR's. The APR is very misleading in the context of a short term loan, they are legally obliged to show it though.
In the middle example The cost for borrowing £150 over 2 weeks on their website is £16.80, a flat interest rate of 11.2%

 

[dazzer6666]

and there lies the whole point. It is not a one year loan. Looking at the examples shown in their illustration shows that different amounts over different times using the same fixed interest rate produce different APR's. The APR is very misleading in the context of a short term loan, they are legally obliged to show it though.

Correct, although it’s not really misleading as the actual rates and costs are shown in any quote - you’d think a fixed rate of 292% would be enough to put most people off......

 

[GOM]

Correct, although it’s not really misleading as the actual rates and costs are shown in any quote - you’d think a fixed rate of 292% would be enough to put most people off......

But to most people the interest rate is irrelevant, it comes down to how much do I have to pay ?

 

[dazzer6666]

But to most people the interest rate is irrelevant, it comes down to how much do I have to pay ?

Yep.....and APRs are mostly quoted for comparison purposes to demonstrate ‘true cost’.

Suspect most borrowing from the likes of Wonga don’t even consider the cost really.

 

[pb21]

Who the feck borrows £300 and then pays back £430, just three months later?

 

[dazzer6666]

Who the feck borrows £300 and then pays back £430, just three months later?

They lent 0.4 billion in 2015 (latest accounts available)

 

[Stat Brother]

Who the feck borrows £300 and then pays back £430, just three months later?

I'll hazard a guess someone who needs £300 now who expects (hopes) to have more money 3 months later.