While watching telly the other day – or, research, as I call it, I saw an ad for a loan company whose APR was just shy of 2700%. Yes, 2700%. I couldn’t believe it either. Why would anybody in their right mind borrow from such a company?
Probably someone who is desperate for cash and has nowhere else to turn.
Now, the reason I’m not going to mention the company’s name is because I remember Stelios, The Easy Jet boss, asking Branson whether he should allow his company to be used as the basis for the documentary series ‘Airline’ as it might have a detrimental effect on his company. Apparently, Branson advised him to go ahead on the basis that no publicity was bad publicity.
So, with that in mind, I am no going to dignify the afore-un-mentioned company with any free advertising. (Plus I don’t want to get my arse sued off.) That said, I don’t think it would be too difficult to find un-said company if you really wanted to.
Intrigued, I checked out their website to see why the APR was so astronomical. They have an entire section dedicated to explaining how unfair the APR system is in relation to their revolutionary new model.
Basically, APR is calculated over the period of a year. While this company’s loans are calculated to be paid back between 1 – 48 days so the APR model is outdated. Seems a reasonable argument. Except when you do a quick online quote. The maximum you can borrow is 400 quid. Over 48 days it would set you back £597.47.
I don’t know about you, but 200 quid interest for six weeks seems pretty high.
I suspect that if you couldn’t manage to pay off that amount within the 48 days and had to negotiate a longer term the quoted APR rate could come into place. And if you couldn’t pay off 2700%, I imagine something, or someone else might come into place. Into your place with a removal van.
Has the recession struck so hard that desperate people would turn to such organisations for a quick fix? I presume so, otherwise it wouldn’t exist. The point is, should it be allowed to offer such a product? If not, where would people get the money from? I don’t have the answer, but I am alarmed that such companies exist.
Should the ConDems be putting pressure on the high street banks to be more flexible in lending money in these dark times? We bailed them out, isn’t it about time they bailed out the people on the brink of poverty?