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Payday Loans 'Gravy Train' is Derailed
tiger2000
Posts: 8,541 Forum Member
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I suspect that a few will be going out of business now that there is a bit of regulation on their actions...
http://www.bbc.co.uk/news/business-28305886
http://www.bbc.co.uk/news/business-28305886
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I don't think it's a shame. Why should payday lenders be able to charge extortionate rates on what they lend to their customers? It sounds like you're all in favour of their extortionate interest rates, which is very strange.
Delicious to contemplate.
I can't see how they would go out of business if the interest is at a sensible amount, but enough to make a profit. Payday lenders have been laughing their heads off at the amount that they've been getting back. This has been long overdue.
No doubt they will because they're greedy swines.
As long as there people who don't earn enough, can't budget properly and/or want the instant gratification of a new phone, nights out etc.
Lenders like this have always been there to fill the demand, the only difference was they used to be local loan sharks, who rather than sending fake legal letters and trashing your credit rating used top come round your house and kick your front door in.
As I've always said, I have no objection to Payday Loan companies at all. If people use them as they're meant to be used, there are NO extortionate interest rates.
If people abuse them and think they can pay back the money whenever they like and subsequently whinge about the high interest charges then I have no sympathy for them.
20% pa is a high rate of interest, but if you borrow £100 for a week, the interest amounts to 40p. Hardly sufficient to cover admin, provision for bad debts, and return on capital.
The companies could introduce a fee, but that would be taken into account in calculating APR.
Would you prefer to see these companies cease trading, or do you accept they provide a useful service?
I can really see the new regulations working.....
Come off it now. It's not like these are hidden charges. These people know exactly what the rates are and how much it's gonna sting em for before they take out these loans. You can't blame the loan companies for other people's stupidity.
Half the people who use these lenders are people who can't control their spending. Taking out loans to go on holiday, have a new tv or go for a night out, latest phones and gadgets or to buy beer and **** with is only their own daft fault. Some even get loans to pay off credit cards or other loans. I know this girl who is 18 that uses Wonga so she can have nights out with her mates and her mum which is also up to the eyes in loans encourages her. Hardly a priority.
Personally I'm all in favour of penalising these idiots who can't stop spending money they don't have. Why should these people get away with being able to default on loans and only be hit with a nominal fee? With them it's all about wanting it now regardless of cost. These people have never heard of cutting back and saving up or buying second hand or living within their means.
The reason half these people have to go to these payday loan companies is because their own banks wont give them an overdraft facility or a loan at sensible rates. Why do you think that is? Because perhaps they know they haven't got the money to pay it back or they have bad credit due to not being careful with their money in the first place.
We are a low income family on benefits but we have an excellent credit rating and have never been in bad debt because everything we want we either save for or make a plan that means we can pay it back at a rate we are able to afford and we never get credit for anything unless we have the money to pay it back on time and we always make sure that we have savings in the bank to cover anything we borrow just in case the unfortunate happens and were suddenly without income.
They will still only be able to charge 2x the original loan, and since any enforcement would have to go through UK courts, that is all they would get no matter how they try to wriggle around the new regulations. The 2x Rule is the most important part of the entire announcement.
Not if the sister company is registered and operated from a foreign shore outside the scope of UK (and EU) courts. As the original article suggests, many wanting a loan who might be rejected under the new regulations will look abroad instead.
And yet they've been told to lower their interest charges.
Totally agree. You can't blame these loan companies. They specialise in lending money to people who have bad debt, poor credit and a history of being careless with their money. Who in their right mind would give them a sensible APR given the fact that most of them are likely to default on their payments leaving the loan company out of pocket.
Best way not to get stung by these companies is simply don't use them. Nobody forces these people to take out these extortionate loans. If people didn't live beyond their means they wouldn't be in so much trouble.
The payday loan companies know that people that have little money coming in will resort to going to them because getting a loan from them is FAR easier than trying to get a one from the Bank. I'm not saying that people who lend from them won't know how much the interest is, but just that the payday loan companies should lower their interest rates.
They are extortionate but not given the fact that they are lending to people who can't get credit with their own banks because they have a history of being useless with money.
If you were lending money to someone who had bad debts and poor credit and you had suspicions they may miss payments or even default on the loan, then wouldn't you want a lot more interest off them?
The idea is, because there's a chance that they can't afford to pay it back, they get as much of their money back as quickly as possible. Rather than spreading it out over weeks or months at an affordable rate these people want their return ASAP with a lot of security to cover the fact that a lot of their customers possibly can't afford to pay it all back.
But these companies aren't charging 20% per annum. They are, and will continue to be able to charge, more than that per month. From the BBC link.
And yet they don't lower the interest rate once it's been paid back. I'm assuming they don't anyway.
The issue with payday loans IMO is the lack of responsible lending, not the interest rates.
Why should they? They are lending to very very high risk customers who can't manage their finances which have histories of bad debt and defaulting on other loans. Why should they get it as easy as those with good credit scores? These loan companies want as much back as they can get while they can get it.
Simple solution not to get stung is don't borrow money that you can't afford to pay back or better still, cut back on the non essentials and try living within your means instead of going out wanting a new tv or phone or a holiday or going out for a drink and a takeaway and then going to loan shark because you've blown your monthly budget on beer and ciggies.
I've got very little sympathy for people who can't be bothered to manage their finances better. Everything today is about wanting it all now and worrying later about how they're gonna afford to pay for it.
Neither would a regular credit card company if you never cleared your debt in full. If you only pay off the interest every month and not the balance It just accumulates so you COULD end up paying more in interest than you initially borrowed. That is same for any credit company as far as I'm aware.
I see your point though but it really is there in black and white. They are made aware of the terms of the loan and the rates prior to accepting the agreement. Nobody forced them to take out these loans. The majority of them do so because they can't budget their own finances. That's nobody else's fault but theirs.
It's like blaming a casino for taking all your money because you can't control how much you gamble. These people prey on stupid idiots who can't control their money. They are not kids who have been forced into an agreement. They are adults who do so of their own free will having been read all the terms and conditions. If they end up in trouble because they can't afford to pay it back then that's their problem surely. Don't enter into an agreement if you can't fulfill your end of the deal.