http://www.bbc.co.uk/news/uk-16063271

I don’t know about the rest of you, but we’re getting leaflets posted through our door here offering “doorstep loans”. One even said that the collectors are “friendly”. Yeah, right.

Not had them yet but they remind me of the 80s and stories of peoples kneecaps having meetings with baseball bats from lenders.

Not sure how these companies get away with it TBH, several adverts for these sorts of things say in the small print on the screen that they have APRs of around 1000% or 2000%.

They get away with not because they can. Until people hit major crisis points with this, and possibly a TV programme like Watchdog takes up the story and ramps up public opinion, they will carry on. As the article says at the end, the alternative for a lot of people are the illegal loan sharks.

Those massive APRs were staggering to see when I say the first advert on TV for them. I was wondering how people could keep on top of such loans. Clearly they can’t.

I suspect that there will be a lot more of these companies will surface as the recession bites harder and deeper.

EDIT:

Apparently, Wonga won the Start Up awards this year, despite Spotify collecting the prize:


http://eu.techcrunch.com/2011/05/17/won ... t-spotify/

Unsecured bridging loans have always had very high interest rates. They are only supposed to be taken out for a very short period of time.

It would be better if they simply charged an "arrangement fee" and then a more reasonable interest rate, which would at least prevent the loans spiralling ridiculously out of control. However, it's a free market with lots of competition so I guess the punters don't want that.

I'd seen their ads and hadn't really paid much attention, but after reading the story I decided to take a quick look at them.

My fridgefreezer broke earlier this month. Luckily, I could afford to buy a new one. let's say for the moment due to some sort of cashflow thing (it is Christmas, after all) I couldn't afford to replace it myself and decided to borrow some money from Wonga to do so. After all, you pretty much do need to have a fridge, right?

IIRC, the cheapest fridge freezer I saw at was £180. £180 quid borrowed from Wonga for 30 days, you pay back £240.
That's an APR (according to them) of 4214%. That's right, over four thousand percent.

I don't care what you say, that's sodding immoral. Nobody borrows money at that kind of charge unless they have nowhere else to do so (that is going to keep them attached to their kneecaps anyway) and people who are in such a vulnerable position don't deserve to be exploited (and that's what this is, make no mistake). They don't need to charge that. It's a disgrace.

It says a lot about the prevalent attitude that someone is complaining that a company with that business model didn't win awards. I don't normally say this, but I'm on the Telegraph's side on this one. That lot certainly don't deserve free publicity. Frankly, I think they should count themselves lucky they're not in jail.

Jon

I don't care if it's immoral or not, that sort of loan business should be discouraged, especially in the current climate.

Captialism with some morals and commonsense should be the way forward. Nobody should be exploited to such a degree and banks that lose money should never pay out bonuses to the people involved in that aspect of the company that has lost money.

Gonna happen? Doubt it.

Like I said, it's a free market and there's a lot of competition.

I imagine the default rate is very high on these kind of loans. Therefore it's not unlikely that any company offering a significantly lower rate would make a loss. You basically have to decide if this type of loan should be legal or not.

If you decide to prohibit interest rates that make it a viable business, then you are forcing people to go to the illegal loan sharks. I can't believe anyone thinks that's a better solution - but it is the only alternative, unless you want the government handing out "emergency loans" left right and centre?

The biggest problem today is that people don't save anything. I know interest rates are so low you couldn't limbo under them, but that's no excuse for a spend-spend-spend attitude. A large proportion of the population appear to think that money grows on trees (plastic ones), and that even if they get into massive debt they can still get money from somewhere and sod the consequences, and this mentality has been further backed up by a welfare state that seems to give you benefits for just about anything (I'm surprised you can't get benefits for having a dog, but I'm sure that'll come at some point).

I was brought up on the principle that if you can't afford to buy something without going into debt, then you can't really afford it. Seems the principle of "living within your means" died long ago.

That is part of it. I also remember my dad talking about when he had to get a loan years ago he had to get suited and booted and take a trip down to see the bank manager in order to do it.

Benefits are calculated by what is deemed to be reasonable for living. All of that data comes from various sources - studies, the census, ONS data, etc. etc.. I know in the 1980s that benefits had a component for cigarettes. Now, we didn’t add in a few quid for a packet of 20, but in your £30.00 (or whatever it was at the time) personal allowance a week, some of that money was there for tobacco. This kind of data will change, but I think you may find that there are components there for stuff you probably never considered. Having access to a TV would now be defined as a necessity for modern living, so I guess your JSA will include a component for a TV license.

If you are blind, you may get extra cash. Guess what - you may have a guide dog. So that’s catered for.


So was I. I have yet to take out a loan to buy a car. It’s all been cash up front.

Other half’s family work on the buy now, pay later system. It seems an alien concept to me, and I’m sure they feel that my attitude is odd too.

LMFTFY.

It's just not realistic to expect a cleaner on £10k to be able to save up for things. Despite what the adverts show, it's by-and-large not the middle classes going to these companies but rather those at the bottom end - it's essentially an extortion racket preying on the young, the elderly, the desperate, the poor, the poorly educated and the vulnerable. If you walk around council estates and talk to people, you'll find a shocking proportion going to companies like Provident whose interest rates are nothing short of vulturous.

You'll also find agents from these companies going round those same houses offering what they dress up as free money. The usual argument goes that people are free citizens and should be allowed to purchase loans at the doorstep if they wish. However, the number of vulnerable people who get caught out by this is horrendous and anybody with the sense to be able to understand the loan probably wouldn't be going to these lenders.

If anybody wants to reduce this problem they'd need (IMO) to do the following:

• Cap total payable loan interest at, perhaps, 200% of the original loan
• Ban doorstep loan selling
• Promote and multiply the local Credit Unions which have been set up precisely to combat this problem >> List of Credit Unions <<
• Abolish VAT and increase income tax to compensate

It's a bit like running an AA meeting in a pub during happy hour.

It's more like saying mugging should be legal because after all the victims had the choice of whether they walked down that particular street or not.


Jon

If I were you I'd be tipping off the local constabulary and Trading Standards department about illegal lending.

Santander on an unarranged overdraft of £100 over 30 days means you would repay £200, that is 819100% APR

Barclays, LLoyds TSB and just as bad averaging over 300000% APR

They don't hide the high APR as it's designed for a short term loan