MSE News: Wonga: Payday loans 'do wonders' for yo...

[MSE Helen]

"The reality is often the opposite as many lenders view the fact you've used a payday or short term loan as a negative..."

Read the full story:

Wonga: Payday loans 'do wonders' for your credit rating... really?

[cepheus]

Taking out any loan which isn't in the single figure APR category suggests either a gross naivety of money or an unhealthy obsession with consumerism and inability to delay material gratification. There may be occasional exceptions, but taking out high APR loans should be once in a lifetime events at most.

Taking out a pay-day loan at thousands of percent, makes about as much sense as chopping of your arm to prevent your finger bleeding. The financiers which prey on people with these will one day viewed like medieval quacks.

[Gary SSS]

Very interesting story! Payday loan companies certainley do not warn of the detromental effect taking their loans could have on your credit status - People who take these loans arent neccessarily cash hungry but due to the current financial climate and lenders not lending these sorts of loans are the only one's available to a lot of people. Just note the amount of payday loan companies there are now! Its a massive money making market!! This statement that having these loans can do "wonders for your credit rating" sounds ludicrous and is totally misleading - these companies need to be taken in check imo!

[Experian company representative]

Experian quote is taken from a website Q&A if you'd like to see the whole piece.

James Jones

[BugsyBrowne]

Originally Posted by Experian company representative

Experian quote is taken from a website Q&A if you'd like to see the whole piece.

James Jones

And this is coming from a company(Experian) who rips customers off on a daily basis with their meaningless so called �15 credit scores when in essence they don't lend money which infact means void.

James jones and his Experian chums should be investigated if you ask me as their misleading tactics are no different to a loan broker asking for an upfront fee.

[Gary SSS]

Bugsy i agree - they charge �7.99 for access to information about YOU - then they have the cheek to charge a further �5.95 for a score that is basically a guess and means nothing - even if the score they rate you as is 999 excellent - if you have a bad past with RBS for example they wont lend you any money no matter what experian score you as - the whole Experian and equifax credit agencies are full of so many holes its unblieveable!!!!

[JimmyTheWig]

Wonga's email to customers says: "Repaying your Wonga loan on time does wonders for your credit rating!"

I guess that's true compared to repaying your Wonga loan late!

[Rafter]

Taking out any pay day loan says either:

I'm maxed out on my credit card and overdraft and my bank won't extend it.

Or.....

I'm so badly organised that I can't arrange an authorised overdraft during banking hours so have to resort to Wonga's 24/7 service.

Either way this has to be negative for your credit rating.

As a society we have to ask ourselves whether Wonga and their like provide any useful service or actually whether their 'profits' are actually losses from parents, friends or other financial services companies who have to bail Wonga customers out when inevitably they get into difficulty.

The 'minority' of customers who genuinely benefit is so small in my view it doesn't justify the damage being caused to the majority and any lending whether the customer has to pay back more than twice what is borrowed when measured over a year should be banned. i.e. No APR over 100%

R.

[JimmyTheWig]

Originally Posted by Rafter

any lending whether the customer has to pay back more than twice what is borrowed when measured over a year should be banned. i.e. No APR over 100%

Do you know that would rule out many high street banks' arranged overdraft charges? It's not only the payday loan companies who use such high APRs.

[Typhoon2000]

Mmm ... Mortgage companies don't like it if you have regular loans, overdrafts, credit card balances or even unused credit lines. Add pay day loans to that list.

[Rafter]

Originally Posted by JimmyTheWig

Do you know that would rule out many high street banks' arranged overdraft charges? It's not only the payday loan companies who use such high APRs.

That was kind of my point Jimmy,

Don't have a problem with a bank covering its costs for setting up a loan in the first place. But charging this fee, on top of interest, for what is essentially a rolling facility is just profiteering in my view - and this is what most overdrafts and pay day loans become.

If a bank or loan company needs to charge more than �500 in interest and charges in a 12 month period for a �500 loan or overdraft to cover costs and losses for customers who can't repay, I'm questioning whether the money should even be lent in the first place.

My view is that it is socially destructive. In otherwords the value of the loan to the customer is less than the cost of all the social problems these loans cause for family, friends and the borrower themselves.

R

[cepheus]

The wreckage of pay-day loan companies

[lankeela]

I would just point out that those of us who use payday loans have usually exhausted all the other avenues and provided they are used as they are meant to - i.e. a short term advance paid back on payday then they do what they say on the tin. Most of us have such poor credit ratings anyway by the time we need one that we wouldn't get a bank loan or credit card from anyone so credit ratings don't really matter. What does matter is having the cash when you really need it. Don't think anyone would take one out unless it was really necessary. If any of the critics are willing to lend me a few quid for less interest I'd be happy to hear from them.

[zx81]

Originally Posted by lankeela

Don't think anyone would take one out unless it was really necessary.

Although the lady on here who wanted to fund a birthday party for her one year old with a PDL does spring to mind....

[afly]

You make good points lankeela but these companies must not be allowed to paint their lending as good for credit history. It is clearly false

[MacMickster]

This type of "mistake" by Wonga, trying to suck in those who want to improve their prospects of getting a mortgage or mainstream credit is, in my opinion, criminal.

Almost by definition, PDL companies will only get business from those who have previously not been good with money. This type of advertising is akin to a loan shark who pretends that their "service" offers a way out for the desperate, while actually ensuring that they will remain the only lender available to their customer, trapping them into a cycle of debt.

The friendly and happy Wonga pensioners seen before the start of sponsored TV programmes, and now sponsorship of a Premier League football club all serve to make them appear a mainstream choice of lender, rather than a lender of absolute last resort.

Yes Wonga and their ilk can make a case that they provide a valuable service which could actually save the financially astute some money in some circumstances, but in practice it is not the financially astute that they are trying to attract as customers, otherwise they would operate the same credit checks as mainstream lenders and turn down those who are likely to have difficulty in repaying their loans. They, like loan sharks, want their customers (the poor) to roll over loans at extortionate rates of interest so that they permanently impoverish themselves whilst the PDL companies make fat profits from them.

[pelirocco]

Originally Posted by Rafter

Taking out any pay day loan says either:

I'm maxed out on my credit card and overdraft and my bank won't extend it.

Or.....

I'm so badly organised that I can't arrange an authorised overdraft during banking hours so have to resort to Wonga's 24/7 service.

Either way this has to be negative for your credit rating.

As a society we have to ask ourselves whether Wonga and their like provide any useful service or actually whether their 'profits' are actually losses from parents, friends or other financial services companies who have to bail Wonga customers out when inevitably they get into difficulty.

The 'minority' of customers who genuinely benefit is so small in my view it doesn't justify the damage being caused to the majority and any lending whether the customer has to pay back more than twice what is borrowed when measured over a year should be banned. i.e. No APR over 100%

R.

I would guess that a lot people who take out PDL have no access to other credit , extending or arranging an overdraft with their bank is not an option for an awful lot of people .

I'm not defending the use of PDL , although I can see the high APR rates are a little misleading , there is no business sense in lending out small amounts and just charging a high street lending rate , these high APs are calculated including an arrangement fee .

Debt is a very difficult trap get out of , especially if you dont generate an excess of income over expenditure