"Wonga. Com"

[Butts]

Is it easy for people who have access to all the normal forms of credit such as bank loans, credit cards and overdrafts to be critical of Wonga and their fellow "Payday Lenders".

Where are the financially disenfranchised supposed to go when they require funds for whatever purpose?

I can go back to 1985 when I had to fly to Belfast with a girl I was going out with the funding of which I took for granted. I only discovered later that she had borrowed the money off a "doorstep lender". This opened my eyes to the world outside the normal banking circles.

How can we ensure poorer people can have access to a reasonably priced loan or advance when needed ?

 

[transmanche]

How can we ensure poorer people can have access to a reasonably priced loan or advance when needed ?

Credit unions.

 

[Butts]

Credit unions.

These need to extended then or there would be no market for the Payday Lenders ?

Plus don't you have to save for so long before you can borrow ?

 

[richw]

I used Wonga once, as it was cheaper than getting a Direct Debit recall fee from a utility supplier and a bank charge from my bank for a Direct Debit I'd forgotten about and not left sufficient funds in my bank. The DD was due a day before I got paid.
When used properly Wonga can be a useful and cheaper alternative to unpaid DD fees from both bank and company owed the Direct Debit, when perhaps an oversight or unexpected expense causes you to be short of a bill payment due a day or two before payday.

 

[EM2]

Wonga seem to have very strict lending criteria, despite running my bank account well for four years and no other borrowing, they would not give me a loan for £200.
The problems come when people can't pay back the loan, and so take out another. And this keeps happening, and is where Wonga's (and others) business model falls down.

 

[richw]

I think from what I've read Wonga are the most responsible of these kind of lenders.

 

[wintonian]

The private market is not going to provide reasonably priced access to credit for those likely to need it most (at least not in a responsible manner) as the cost of such provision is directly related to the risk of default, this risk increases in lower income households and those with less disposable income.

Infect it can be argued that such access to cheap credit played a significant part in the recent and continuing economic downturn. Additionally the deregulation of the mortgage markets in the late 1970's made them much more accessible leading to the the housing boom and bust cycle of the 1980's - early 1990's. Hence why access to credit needs to be restricted (and to some extent destricted when there is a need to encourage growth).

To answer your question provision of low cost credit can only be provided sustainably through mutual interest (credit unions/ friendly society's) and the third sector (charity, voluntary and not for profit) organisation.

 

[Clip]

Maybe people should actually start saving what they can before they ever encounter the need to get some form of credit? You dont have to save a lot but as above if you are constantly paying into a credit union then you are saving and then can access some form of credit.

 

[WelshBluebird]

Maybe people should actually start saving what they can before they ever encounter the need to get some form of credit? You dont have to save a lot but as above if you are constantly paying into a credit union then you are saving and then can access some form of credit.

But not everyone can save. Some people have to spent every penny they earn to be able to live.

 

[Clip]

But not everyone can save. Some people have to spent every penny they earn to be able to live.

Then they wont need credit then as I believe even the very worst paid people in this country still have access to a benefits system that should also give them the required loan for any emergencies that creep up.

 

[richw]

It's not possible for many to save, I'd love to. Worked out all my incomes and essential expenditures, and I have about 30 a month spare. That 30 needs to go on non essential expenses such as visiting family, taking my daughters out for a day, New clothing for my self or my girls. I'm on a half decent wage but unfortunately living costs in Cornwall is sky high. I have 2 brothers, 1 lives in taunton the other cardiff, and compare rent and council tax they both pay considerably less for much larger houses. My brother in cardiff pays less for a 4 bed than I pay for a tiny 2 bed.

 

[Butts]

It's not possible for many to save, I'd love to. Worked out all my incomes and essential expenditures, and I have about 30 a month spare. That 30 needs to go on non essential expenses such as visiting family, taking my daughters out for a day, New clothing for my self or my girls. I'm on a half decent wage but unfortunately living costs in Cornwall is sky high. I have 2 brothers, 1 lives in taunton the other cardiff, and compare rent and council tax they both pay considerably less for much larger houses. My brother in cardiff pays less for a 4 bed than I pay for a tiny 2 bed.

Times are hard for a number of people - I bet business is booming for Payday Lenders with Christmas approaching.

 

[mac]

The bit i don't understand is how can wonga get the money to your account in 15 mins when to move money in your own bank can take days.

 

[richw]

The bit i don't understand is how can wonga get the money to your account in 15 mins when to move money in your own bank can take days.

Within your own banks should be within 2 hours now, has been like this for a couple years.

Sent from my HTC Sensation Z710e using Tapatalk 2

 

[transmanche]

The bit i don't understand is how can wonga get the money to your account in 15 mins when to move money in your own bank can take days.

http://www.fasterpayments.org.uk/

 

[DarloRich]

There is nothing wrong with the service offered by Wonga.com.

I wonder if people who criticise have ever used the service offered. I bet not. They look at the apr of c.15000% and complain, which is fair enough. HOWEVER if you repay the loan within the agreed timescale your interest rate is considerably less than suggested and is often the cheapest way of obtaining short term, low figure, financing. The terms are flexible enough in that you can repay early with no penalties as the intrest is calculated day by day. The problem comes when you DONT pay back within the agreed timescale.

In the past, from time to time, for reasons I won’t go into, I was forced into using these services. Even now, if I wanted to borrow money these type of companies may be the only people who would look at me. I would, say, borrow £300 for 28 days. I would repay perhaps £340-£360 depending on the company. That did not seem excessive considering my circumstances. I was always able to pay within the agreed terms and never incurred any penalty. Hopefully I won’t need to ever use these services again.

I have noted suggestions that if you are on benefits you can easily obtain a crisis loan. Trust me, you can’t! The time and hassle you need to go through to even make an application are such that these companies offer a more attractive service.

Consider that they are lending to the poorest, highest financial risk sector of the community, often people with little or no financial history. The charges reflect this and cover the company risk. I understand there are issues with some of the promotional literature and “small print” documents. People claim they can’t understand them. I always found the documentation very straight forward. It clearly sets out how much you will borrow, for how long and how much this will cost. However, I suppose it could be starker as to the cost if you fail to repay the loan.

Lets not kid ourselves – it would be much better for all to have access to available, affordable, sensible finance. It would be much better for all to access to a credit union. The harsh fact is that they don’t and these companies exploit this.

 

[radamfi]

Do companies like Wonga exist in mainland Europe? I am thinking in particular of countries with a deep rooted culture of saving such as Germany.

I suppose in earlier generations you simply went without if you had no money. I know people even now who are fundamentally against borrowing of any kind and for many people in this country borrowing is against their religion.

 

[Butts]

Do companies like Wonga exist in mainland Europe? I am thinking in particular of countries with a deep rooted culture of saving such as Germany.

I suppose in earlier generations you simply went without if you had no money. I know people even now who are fundamentally against borrowing of any kind and for many people in this country borrowing is against their religion.

This is particularly true of older people brought up in perhaps harsher times. My Mother had a pathological fear of credit or owing people money. If she wanted something she would always save up for it.

 

[bb21]

I have nothing against their existence, however witnessing my previous housemate (monthly income £900) managing to borrow £400 each from Wonga, QuickQuid and two other providers within the space of a couple of hours within the month made me look at these providers in a very suspicious light.

As it turned out, he could not manage to repay it all that month, and ended up with very threatening letters from both Wonga and QuickQuid and masses of excessive fees. It took him six months to clear all his debts.

 

[BlythPower]

Do companies like Wonga exist in mainland Europe? I am thinking in particular of countries with a deep rooted culture of saving such as Germany.

Most progressive, civilised countries have maximum interest rates in place.This map provides comparisons against what's allowed in the UK.

 

[radamfi]

Most progressive, civilised countries have maximum interest rates in place.This map provides comparisons against what's allowed in the UK.

Wow, that does show the UK as particularly uncivilised, even compared to countries we like to look down on.

 

[jon0844]

APR really doesn't work for a short term loan however.

If you made these short term loans illegal because of the 'high' rates, where would people get their money? Loan sharks?

 

[radamfi]

APR really doesn't work for a short term loan however.

If you made these short term loans illegal because of the 'high' rates, where would people get their money? Loan sharks?

Where do they go in other countries where high rates are illegal? I would like to think that so few people get into such difficulties in other places that there would be no market for such services.

 

[jon0844]

Or they measure things differently. APR is stupid for a loan you might pay back in a week or two.

The most important thing should be the total cost payable (likewise for longer loans, where APRs can give the ignorant the impression that they're not paying much without working it out properly over the whole term, as well as other admin fees etc).

APR was designed as a way of making comparisons and works to a degree, but it's not perfect for all loans.

 

[transmanche]

Most progressive, civilised countries have maximum interest rates in place.This map provides comparisons against what's allowed in the UK.

I did note that in the graphic, they state the annual rate (i.e. the APR) in the UK - but don't state on what basis they've calculated the rates for other countries. In addition, any fees charged get included in the APR, as well as interest.[*] But they don't state if any fees are included in the calculations for other countries.

In summary; the graphic is just a pretty map with some numbers on it.


[*] This is why the 'payday' loans have such a high APR - because if you're paying a £10 or £20 fee for a short-term loan, then when it's annualised, the APR looks ridiculous. This is also why APR isn;t a suitable measure for short-term loans.

 

[radamfi]

But could Wonga et al still be profitable with, say, a 40% APR? That would be similar to those credit cards aimed at people with poor credit.

 

[Butts]

How do they recover the money if people default ?

Presumeably a lot of patrons have few assets so a County Court Judgement or Decree would be a waste of time

 

[Eagle]

But could Wonga et al still be profitable with, say, a 40% APR? That would be similar to those credit cards aimed at people with poor credit.

If their APR was 40%, then a person borrowing £100 for two days would pay just 16p in interest. Borrowing £100 for a week would pay 44p. It just doesn't work.

 

[radamfi]

If their APR was 40%, then a person borrowing £100 for two days would pay just 16p in interest. Borrowing £100 for a week would pay 44p. It just doesn't work.

Still a lot of interest for the short period of time.

 

[Eagle]

Not really; if interest rates were that low I suspect they'd be making about 98 to 99% of their revenue in fees rather than interest. (Which could be viable, I'm not sure what fees are allowed to be charged.)