I’m sure a certain carpenter had some thoughts on usury
OK, to be fair the official stance of the Church is that they want to “save” Wonga’s customers from having their debt passed to another payday lender - but I’m confused. Do they plan to reduce interest rates, wipe off the loans or what. I mean you don’t really buy a loan outfit without the intention to loan money do you?
I’m sure many folk will be watching closely, to see how this pans out…
No worries, you can do anything you want, as long as you confess your sins before dying. Then you can hang out with J and the others for a eternity.
Whilst I understand that some people can’t apply for loans by more traditional routes, there must be a better way than this…I don’t know how Wonga and many others get away with these extortionate interest rates.
3 monthly instalments you control
Term 3 months
Daily interest 0.8%
Borrow£300 over 3 months
Interest rate292% pa (fixed)
Two repayments of£143.85
One final repayment of£143.81
Total amount payable£431.51
Not sure how this will work but certainly ironic as the C of E used to have an indirect investment in Wonga until Welby stepped in and had the investment sold, he said at the time that he would try and put Wonga out of business by supporting credit unions, god certainly moves in mysterious ways.
Essentially because the loans are supposed to be short term, low value ones so the absolute cost of the loan is not that high - the other example from their website shows that a £150 loan for 2 weeks costs £166.80 - so the cost is just shy of £17.
It’s not too bad but when you don’t have that £150 two weeks away from payday losing £17 is not really in your interest.
Part of the problem is that people have got out of the habit of budgeting, living within their means and saving enough to cover emergencies.
However that isn’t the whole picture and I would not want to “blame” people for needing a short term loan - there are many reasons for not being able to build up a buffer, zero-hours “gig” contracts mean money comes in sporadically even if you do have “work” and those on benefits might find it extremely hard to save.
If the Church wants to take advantage of the fact that they can pick up the loan book for much less than face value, then write it off fair enough - but I get the impression they want to do this as an investment (i.e have the loans paid back) which is not better than issuing the loan at the same rate as Wonga - even if they take no new loans on.
As an aside - £400million for 200,000 loans is £2k per loan on average - and that might not even be face value. Pretty high for a short term loan provider.
The interest rates are awful… people borrow until payday… then pay back and have to borrow more… what a downward spiral…into the pit…
Agreed and Wonga were one of the lenders heavily criticized for people getting into difficulty.
It’s why the rates are capped at 0.8% per day (although I still make that a staggering 1832% if compounded for a year).
It would not be a viable business to charge the normal of 3.5% pa etc. Based on above example of £300 paid back in 3 months of equal installments the interest would be £1.31 so total due back would be £301. 31.
You cannot compare these type loans expecting anything like a normal APR.
Exactly, they are also hugely high risk - Wonga’s “bad debt” rate was reported in 2013 as 41% having had to write off £76.8 million in 2011 - but a combination of falling customer numbers, the huge compensation payouts, bad debt and the capping of interest rates were, taken together, just too much for it.
As Stella says, it’s a downward spiral. A lot of people live by using payday loans. It’s continuous…probably with credit card debt too.
It’s difficult for me to understand how they get into these situations as I have always budgeted for everything but impossible to condemn if you haven’t been in that situation.
I knew someone about 10 years ago who lost his house because of all his loan debts.
As a young adult… I went berserk one year with my M&S card… buying family the presents I wanted to, rather than merely what I could afford. Took me 2 years of careful budgeting to pay that lot off… I cut-up the card and never had a credit card of any sort since.
Debit Card… different thing altogether…
I’ve actually never used a credit card…I must be a rare species.
I do use one but rarely run up any debt on it as such.
That’s how they should be used. You’re a role model😉
People always loath the money lender except when they need a loan. Wonga out of the market will not eliminate the trade. Many of these companies lend to what we now call sub prime segments with Apr’s reflecting the short term nature and the model which must include costs to reclaim unpaid debt.
It’s the dirty end of the market and pricing no doubt reflects the fact that much of what is lent will never be seen again. I’d be surprised if the Church buys into any money lending operation.
I’m not defending any businesses here and have no interest but there are those who need these loans for whatever reason and there probably always will be, as a high risk group they will pay high costs.
It’s worth noting that those least able to pay are often charged the most. Think about utility meter rates and VAT. Next scandal will likely be equity release where enormous amounts will be owed for taking out modest lifetime mortgages secured on homes.
Enter this world with nothing etc. etc.
That’s an interesting way of putting it!
Our card in UK has always been paid off at the end of the month.