Discussion
If you were going to loan someone £1000 for a month how much would it cost you to check thier background to see how likely they are to pay it back, and how many of the kind of people that want to borrow £1000 for a month are actually going to pay it back?
They have to quote APR by law, but it's not a very usefull measure for this kind of thing. That APR works out at about 30% per month, but as long as the person borrowing £1000 knows they going to have to pay back £1300 in a months time, I don't have a problem with it myself.
They have to quote APR by law, but it's not a very usefull measure for this kind of thing. That APR works out at about 30% per month, but as long as the person borrowing £1000 knows they going to have to pay back £1300 in a months time, I don't have a problem with it myself.
I think the people who are outraged by these really high APR short term 'payday' loans are often as stupid as the people who undertake them.
Say I lend you 500 quid, your credit history is likely to be fecked, you've nothing of worth to secure it against. So the risk is very high. So, to cover the initial costs of being a legal company and not a loan shark I slap a fee for the admin on there, let's keep it reasonable and say 25 quid, and of course some interest, as even the banks can't offer loans interest free and keep afloat, and I'm a company and not your mate or a relative. So let's say for the privilege of me taking the risk of seeing absolutely nothing back from it, I charge you 150 quid - you give me 150 quid more than I lend you to keep the bailiffs away, buy a telly, whatever you wish to do with it.
That is something like 2000% APR I'm charging you, but IMO it's a perfectly reasonable sum given the scum you're often dealing with, and the risks that come with working in that demographic. It's also not a great deal of profit.
Go to a loan shark, see what they charge in comparison, that's pretty much the alternative to these last chance loans, and they don't generally send nasty letters when you default, they send nasty people.
The giveaway with APR is the 'A'. Annual. How the feck can you fairly represent something designed to be paid off in a month with a metric based around annual payments. It's just another stupid law to try and protect the stupid from themselves, which evidently doesn't work as business is booming.
Say I lend you 500 quid, your credit history is likely to be fecked, you've nothing of worth to secure it against. So the risk is very high. So, to cover the initial costs of being a legal company and not a loan shark I slap a fee for the admin on there, let's keep it reasonable and say 25 quid, and of course some interest, as even the banks can't offer loans interest free and keep afloat, and I'm a company and not your mate or a relative. So let's say for the privilege of me taking the risk of seeing absolutely nothing back from it, I charge you 150 quid - you give me 150 quid more than I lend you to keep the bailiffs away, buy a telly, whatever you wish to do with it.
That is something like 2000% APR I'm charging you, but IMO it's a perfectly reasonable sum given the scum you're often dealing with, and the risks that come with working in that demographic. It's also not a great deal of profit.
Go to a loan shark, see what they charge in comparison, that's pretty much the alternative to these last chance loans, and they don't generally send nasty letters when you default, they send nasty people.
The giveaway with APR is the 'A'. Annual. How the feck can you fairly represent something designed to be paid off in a month with a metric based around annual payments. It's just another stupid law to try and protect the stupid from themselves, which evidently doesn't work as business is booming.
Edited by Stu R on Tuesday 8th December 22:50
It is worth borrowing £100 from these people and paying them back £125 if that means your bank account stays in the black and you avoid £70 of bank charges for bouncing a couple of checks for £50.
I used to recoil when i saw those 'APR' figures too.
I used to recoil when i saw those 'APR' figures too.
Edited by Hedders on Tuesday 8th December 22:56
Gring said:
bigandclever said:
Neil H said:
Gring said:
bigandclever said:
Hedders said:
It is worth borrowing £100 from these people and paying them back £125 if that means your bank account stays in the black and you avoid £70 of bank charges for bouncing a couple of checks for £50.
I used to recoil when i saw those 'APR' figures too.
Or call the bank and extend your overdraft by £100 instead. I used to recoil when i saw those 'APR' figures too.
Cost is about 38p a week.
Or don't write bouncing cheques !
mcflurry said:
Hedders said:
It is worth borrowing £100 from these people and paying them back £125 if that means your bank account stays in the black and you avoid £70 of bank charges for bouncing a couple of checks for £50.
I used to recoil when i saw those 'APR' figures too.
Or call the bank and extend your overdraft by £100 instead. I used to recoil when i saw those 'APR' figures too.
Cost is about 38p a week.
Or don't write bouncing cheques !
OllieWinchester said:
It's obvious people don't really get the whole APR thing. If you lent your mate £100 on the basis he had to pay you back in a week, and buy you a pint on top, what would the APR be on that then?
Perfect example. You are an evil loan shark, charging your mate 150% APR. Hang your head in shame.Gassing Station | Finance | Top of Page | What's New | My Stuff