Loan sharks?

[redken1]

Perhaps someone on WB who is employed in finance can enlighten me.

I received a letter from Vanquis bank yesterday informing me that I had been pre-selected to apply for a visa credit card with an initial credit limit of £1000.

Although I have no intention of accepting their offer, I was gob-smacked at the interest rate applied to the card – 39.9% APR variable. In light of the recent ‘credit crunch’ and the fact that interest rates are currently at a historical low, I find this figure unbelievable. :o

Is there a ceiling on interest rates or can these apparent loan sharks fix whatever rates they like?

[njl]

I'm no expert but given what some of these 'payday'lenders charge for short term loans is scary.

[Dabz]

Most I've seen is 2149% apr

You can charge what you want if people will say yes :)

[dell_boy]

vanquis cards as far as i know are used by people who have been made bankrupt,..or financial problems. yes high percentage rates,..but they get offered to anyone (thus the high %)

they are a tool for rebuilding credit ratings,..people get advised to use them,..but payback allmost immeadiately

[Toph]

How is it legal to charge 2000 % apr on a loan when the interest rate on savings is 0.5% ?? :o

[Squashed_Fly]

How is it legal to charge 2000 % apr on a loan when the interest rate on savings is 0.5% ?? :o


You have to look at it in context. the figure is an APR figure (annual percentage rate). Payday loans are for a few days/weeks, so they have to show an APR by law, but it's useless to use it as a comparison tool.

They can be useful, especially considering your banks are the real rip off merchants. Example?

Jon smith has 3 direct debits due to go out of his bank, but it's 4 days before payday and he doesn't have enough left to cover them. If he leaves it, his bank charges £25 per unpaid DD, leaving a £75 charge, and he would still have to pay back the DD after being paid meaning £155 payable and a black mark on his credit history.

Or, he goes to a paydan loan provider, who charges him £30 to borrow £100, meaning hs total repayment is £130, leaving his DDs paid, an extra £20 to tide him over or to be put back towards the repayment (meaning he only pays back £110), and he gets a bonus point on his credit file for paying his DDs on time, and an extra bonus point for having a loan that is paid bak on time.

Now tell me it's the PDL companies that are the criminals, and not your banks......


One other set of examples to highlight the uselessness of using the APR of 2000% as a comparison:

https://1monthloan.co.uk/images/the_problem_with_APR.jpg

[Swanny]

Credit companies are not there to help you, only to help themselves.


The words Robbing B$%*£"&ds spring to mind :)

[Squashed_Fly]

Credit companies are not there to help you, only to help themselves.


With respect, that's kind of a ridiculous comment.

The same is true for any business - they are all there to make money, not just credit companies. However, they are still a better option than racking up bank charges etc which are so ridiculous.

As far as I'm aware, there are no profit making companies that supply services/products, that do so purely to help people, and with no moneymaking objectives in mind. If you need their services, then they are helpful. If you don't, then of course they're of no importance to you

[Scotty]

Credit companies are not there to help you, only to help themselves.


With respect, that's kind of a ridiculous comment.

Oh, the irony...... ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D

[wiltshire builders]

Credit companies are not there to help you, only to help themselves.


With respect, that's kind of a ridiculous comment.

Oh, the irony...... ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D ;D
Steady. The season hasn't started yet. ;D

Very good point though, if used senisibly, pay day loan companies can be useful.
Banks are *@%!$! If i so much as breath near my business account I get charged.
When I was a teen and still living at home I was regularly sent letters about pre-approved loans of £10000. I earned £150 per week.

[Scotty]

Have you seen some of the stuff they come out with in the ads? I can see the point of them for a tide-you-over loan of a couple of hundred quid for a very short period (for those incapable of phoning their bank and arranging an overdraft), but the "satisfied customers" who claim "My bank wouldn't lend me the money to start my own business (Wonder why? There's normally a good enough reason, like being too bad a risk...) but Payday Loans lent me the money and now I run my own company..." This is plainly absurd, unless the business could ramp up immediately and have a massive turnover in no time at all - there aren't many legal activities that can do that :-? How much does someone normally borrow to set up a business? Surely it has to be in the thousands, and it's normal not to expect to turn a profit for a couple of years at least, so borrowing a few grand at 2000% APR over a couple of years would be more than a little pricey and would surely consign a fledgling business to struggle for years...

[Dabz]

if you can't borrow money through the normal methods (bank, standard loans) then there's usually a bloody good reason. The idea of "I don't get paid until next week but I need money NOW!" is yet another example of the sad and sorry state of our society...we've had 2 decade of being able to have whatever we want, straight away, which is why we're now in a financial crisis

[Kevinb]

Have you seen some of the stuff they come out with in the ads? I can see the point of them for a tide-you-over loan of a couple of hundred quid for a very short period (for those incapable of phoning their bank and arranging an overdraft), but the "satisfied customers" who claim "My bank wouldn't lend me the money to start my own business (Wonder why? There's normally a good enough reason, like being too bad a risk...) but Payday Loans lent me the money and now I run my own company..." This is plainly absurd, unless the business could ramp up immediately and have a massive turnover in no time at all - there aren't many legal activities that can do that :-? How much does someone normally borrow to set up a business? Surely it has to be in the thousands, and it's normal not to expect to turn a profit for a couple of years at least, so borrowing a few grand at 2000% APR over a couple of years would be more than a little pricey and would surely consign a fledgling business to struggle for years...

I would like to borrow £10k to start a loan shark company. I wonder if Lloyds would accept this as a good business venture. Return is instant or concrete boots and the nearest lake ? ;D

[Kevinb]

if you can't borrow money through the normal methods (bank, standard loans) then there's usually a bloody good reason. The idea of "I don't get paid until next week but I need money NOW!" is yet another example of the sad and sorry state of our society...we've had 2 decade of being able to have whatever we want, straight away, which is why we're now in a financial crisis

Financial crisis I had to mothball the west wing of the house and get rid of the butler. Times are hard. ;D

[Squashed_Fly]

I can see plenty of reasons why they would be used legitimately. And I've never heard of a business being set up wth one!

Many people have lifestyles in accordance with their salaries. You build up a good life, big mortgage based on your earnings etc. Then for some reason, your salary drops dramatically - couple of bad sales months and no commision etc. If you've always had a great credit history, then you might be lucky enough to have your bank extend your overdraft. If you have anything less than perfect, then you may find you need a little extra to top up your salary for a short while.

Wilts Builders is right though - they are only a good fallback plan if used sensibly and paid back on time thus avoiding huge interest charges etc. If you're not 100% sure you can pay it all back on time, then it's not worth it. With what I used to do for a living (credit controller), I've seen many people fall foul of them. But I've also seen lots of circumstances when they worked fine and were better than bank charges.

Bottom line is, if you're bad with money, don't touch them. If you're good with money, but need a short term solution to a problem (car breaks down etc), then they can be a good solution.

[Dabz]

if you're good with money then when your salary is allowing a good lifestyle you will limit the size of the mortgage you take to allow saving for the worst case scenario...?

[Ducatista]

Is there a ceiling on interest rates or can these apparent loan sharks fix whatever rates they like?

Legally you can charge whatever you like for most services. There are laws about not mis-representing things and making charges and fees clear, that's why we have APR, but there is no cap on interest.


If you're good with money, but need a short term solution

If you're good with money you should have a budget for forseeable expenses (like car breakdown) and insurance or contingency plans for events like death, sickness, accident and redundancy, so should in general not need a short term solution.
If you don't have enough spare each month to put aware for expected expenses then you are living beyond your means.

[Ducatista]

How is it legal to charge 2000 % apr on a loan when the interest rate on savings is 0.5% ??

2000% is unsecured.
Savings are not 0.5% that's the BOE base rate but if you are saving you'll have guarantees with that. Up to £85K you are covered by the financial services compensation scheme.

2000% is extortionate, but you aren't comparing like for like here.
Savings come with guarantees, unsecured loans don't.

[Col]

Peter Cushing wanted paying for a show---here's how he got on looking for a pay day :o

http://www.youtube.com/watch?v=rMVMhkLIsEE

[redken1]

May be I’m stupid, but I don’t really understand the logic where banks like Vanquis target potential customers who are high risk due to defaulting on previous financial agreements, offering them loans at extortionate interest rates. I know these banks must play the percentages game (excuse the pun) in the knowledge that a significant number of their customers will default and they offset this loss with high rates.

Of course consumers should refrain from using credit if they do not have the means to meet the repayments, but the reality is that that’s never going to happen.

Why can’t the government regulate on two counts?

Introduce mechanisms whereby lenders are statutorily obligated to carry out extensive checks to ensure that a perspective customer has the means to repay a loan. (Certainly appears not to be the case at the moment)

Secondly, set a ceiling on interest rates making loans more affordable.

Just a layman's take on the easy buy now pay later culture.

[Squashed_Fly]

The reason is Ken, is that if you've had probs in the past, but now you're good for the money (so to speak), it gives you a chance to prove it with a low limit, but higher interest card.

You're looking at 2 completely different products though. Vanquis/Capital One credit cards are aimed at people trying to rebuild their credit history & rating over a period of time.

Payday loans are aimed anyone who needs a short term, one off solution and are not meant as an ongoing fix. If they are used as such, then it's time to question how you are handling your finances.

[redken1]

Aidan,

I have to confess that I'm no expert on the subject, but what I’m trying to say is that the credit crunch happened due to irresponsible lending and borrowing. If we are to avoid a repeat in the future things need to change, surely?

[Squashed_Fly]

Completely agree. But until the economy is in line with peoples salaries, not sure if that's possible. Fuel gone up by 35p a litre in the last 2 years, prices of basics such as bread and milk risen by over 20%, yet salaries aren't going up in line. Life is getting more expensive, and the fat cats are taking all the money in bonuses rather than paying the workers a decent, liveable wage!

Rich getting richer, poor getting poorer!

[redken1]

Completely agree. But until the economy is in line with peoples salaries, not sure if that's possible. Fuel gone up by 35p a litre in the last 2 years, prices of basics such as bread and milk risen by over 20%, yet salaries aren't going up in line. Life is getting more expensive, and the fat cats are taking all the money in bonuses rather than paying the workers a decent, liveable wage!

Rich getting richer, poor getting poorer!

Well said brother :-X ;) ;D

[Ducatista]

If we are to avoid a repeat in the future things need to change, surely?

Things have changed significantly. There has been a huge credit crunch. Haven't you read this? ;)

http://www.thedailymash.co.uk/news/business/banks-use-man%11eating-tigers-to-deter-new-borrowers-20080328827/

[redken1]

If we are to avoid a repeat in the future things need to change, surely?

Things have changed significantly. There has been a huge credit crunch. Haven't you read this? ;)

http://www.thedailymash.co.uk/news/business/banks-use-man%11eating-tigers-to-deter-new-borrowers-20080328827/


;D ;D ;D may be that's the answer ;) ;D

[Squashed_Fly]

If we are to avoid a repeat in the future things need to change, surely?

Things have changed significantly. There has been a huge credit crunch. Haven't you read this? ;)

http://www.thedailymash.co.uk/news/business/banks-use-man%11eating-tigers-to-deter-new-borrowers-20080328827/


I'd forgotten how good The Daily Mash was! ;D ;D ;D

[wasted_ace]

if you can't borrow money through the normal methods (bank, standard loans) then there's usually a bloody good reason. The idea of "I don't get paid until next week but I need money NOW!" is yet another example of the sad and sorry state of our society...we've had 2 decade of being able to have whatever we want, straight away, which is why we're now in a financial crisis

Spot on the Mark :)
Credit was way to easy to obtain..it was always going to end in tears :'(

[Kevinb]

Completely agree. But until the economy is in line with peoples salaries, not sure if that's possible. Fuel gone up by 35p a litre in the last 2 years, prices of basics such as bread and milk risen by over 20%, yet salaries aren't going up in line. Life is getting more expensive, and the fat cats are taking all the money in bonuses rather than paying the workers a decent, liveable wage!

Rich getting richer, poor getting poorer!

Shouldn't that be richer getting richer, poorer getting more benefits, can have nice cars, iphones and flat screen tv's and the middle classes are getting stuffed from all angles >:(

[Ducatista]

poorer getting more benefits, can have nice cars, iphones and flat screen tv's

Do you really know anyone on benefits who lives like that?