TV loans

[topaz]

they only borrow small amounts over short terms

example on wonga

Borrow £300

Pay back in 15 days £345.20

APR 4214%

Dont know how they work it out

http://www.moneysupermarket.com/payday-loans/default.aspx?p=0&ef_id=BF9O-G5DNWMAAE-Y:20111229134227:s

[Miniliteman]

http://en.wikipedia.org/wiki/Annual_percentage_rate

Maybe the APR of 5570% is not really that high, see halfway the wiki-page.

[Dan492]

Alan....have you been stalking my Facebook!?!

On Monday 26th I posted this photo:



Crazy!

[hincyprus]

Why it shows as this APR.

Hi,

The government in its wisdom decided that any loan/finance company should be open and up front with its interest rates.

For example.

Borrow 100 @ 10% = Repay 110. Simple.

However what has not been said is: How long can you borrow the money for?

Interest rates normally refer to the amount of interest you pay on an amount of money that is borrowed for 1 year. Thus the term. APR. Annual Percentage Rate.

(I will not discuss exact calculations of APR as it is much too complicated). We will keep it in simple terms.

So, instead of borrowing 100 @ 10% for one year, we borrow the money for a month.

We still pay back 110 but in a month instead of over a year.

Yes you pay 10% and are probably quite happy to do this. Between friends for example.

We must remember that the company who loaned you the money have borrowed that 100 from, say, a bank and it has cost them 100 @ 5% but for a one year term.

If they loan out that 100 twelve times in each year they make an interest income on that money of 120.

The bank get 5. Net profit to the loan company 115.

This is it in very very basic terms.

What the government says is that the company lending the money for short periods should not quote our 10% figure but the cost for borrowing that money over a full year.

Thus we see these huge percentage figures being banded about.

It should be said, that this type of loan is not new. It started with moneylenders back in ancient times. Thats what the Jews were said to be doing in the Temple , in the Bible.

Most people who take these loans are the ones that credit cards banks etc have now extended maximium credit to and they are forced to go elsewhere for the money. Rates are high because the lending risks are high.

Unfortunately for many people, the Government, in the 1974 Consumer Credit Act and future amendments to it opened up a can of worms containing loopholes you would not believe.

It has allowed what were known as "Loan Sharks" to work within very wide frameworks which naturally opens up the markets . If the government had merely amended the 1926 Moneylenders Act then this would not have happened. It was a law with very very tight frameworks which protected the borrower not the lender.

Once more, it is the poorer off that are suffering at the hands of these people. My advice to anyone who is so desperate for money is to go to the local credit agency or Citizens Advice.

Also......If you cannot afford to buy it ....DON'Y. Save up.

[KelvinS1965]

Also......If you cannot afford to buy it ....DON'Y. Save up.

Ah but these days everyone just has to own the latest flatscreen TV, Apple product, etc. People getting their first home seem to want everything to be brand new; furniture, carpets, etc, so the idea of 'making do' and saving up seem to have gone by the wayside. It's taken us 10 years to get our house straight, gradually improving it (eldest used to appologise to her snobby school friends about our old living room carpet when we first moved in ), but at least it's paid for as we went...couldn't afford to have done it paying the kind of interest rates we're talking about here (I know they aren't long term loan rates ).

I think I'm in the minority these days though.

[alancdavis]

good explenation,,,ithink,,

[paul mex]

Ah but these days everyone just has to own the latest flatscreen TV, Apple product, etc. People getting their first home seem to want everything to be brand new; furniture, carpets, etc, so the idea of 'making do' and saving up seem to have gone by the wayside. It's taken us 10 years to get our house straight, gradually improving it (eldest used to appologise to her snobby school friends about our old living room carpet when we first moved in ), but at least it's paid for as we went...couldn't afford to have done it paying the kind of interest rates we're talking about here (I know they aren't long term loan rates ).

I think I'm in the minority these days though.

Your bang on the nail head there mate.You've done well to get sorted in 10 years I'm still not there after 20 !!!

[KelvinS1965]

Your bang on the nail head there mate.You've done well to get sorted in 10 years I'm still not there after 20 !!!

Er...not that well: There's a certain RS2000 that hasn't been getting any attention during this time. Plus I've somehow got roped into doing some more work on the main bedroom in the new year, which has knock on effects to other rooms. Again, it'll be paid for as we go otherwise it wouldn't be happing.

[hincyprus]

Ah but these days everyone just has to own the latest flatscreen TV, Apple product, etc. People getting their first home seem to want everything to be brand new; furniture, carpets, etc, so the idea of 'making do' and saving up seem to have gone by the wayside. It's taken us 10 years to get our house straight, gradually improving it (eldest used to appologise to her snobby school friends about our old living room carpet when we first moved in ), but at least it's paid for as we went...couldn't afford to have done it paying the kind of interest rates we're talking about here (I know they aren't long term loan rates ).

I think I'm in the minority these days though.

No you are not. Not sure how many houses we have had now but we still do it the old fashioned way. Credit card, Yes. But paid off each month. Free interest etc. Debit card...instant, Hp none. At least I know if something comes up and we need it. If we have the money we can buy it.

we just like it this way and it is so much cheaper in the long run

H

[hincyprus]

good explenation,,,ithink,,

Believe me you should read the documents. Complete mumbo jumbo to the likes of me and you.

I once took someone to court over a GBP100 debt, in the times when it was still the 1926 Moneylenders Act.

I saw the book of it sitting on the Judges table with lots of "post its" sticking out.

Whilst waiting for lunch I sat down with my lawyer and we discussed why the Judge should have the "Act" sitting there. He has obviously decided to check out the rules said my lawyer. uuum said I. We looked as well and found that even though we had not added any penalty interest on the debt that was over a year old the build up to the original debt caused the infringement to the act as it meant we had effectively charged 749%.

When I faced the judge I asked him not ignore any claim for interest and rule on the "Capital" only.

Thank you very much he said...I find in your favour and the defendants will pay you back.............................................. ....

At the rate of 50pence per month !!!!!!!!!!!!!

Naturally I never got paid.

I hate what is now the "Consumer Credit Act".

I am sticking to cars......

[Frosticles]

My last tenants ran HUGE debts up with these company's....