This week, Wonga, one of the UK’s leading ‘payday loan’ companies is contemplating shutting its doors and entering Administration as you may have seen in the media.
This follows the closure of several cash Shop outlets throughout the British since 2016, but what does this mean for the industry of genuine loan sharks, and certainly will this finally placed a stop to cash advance businesses?
To place things into viewpoint, you would likely pay back ?1,125, this is with an interest rate of 24.9% if you were to borrow ?1,000 from a retail bank such as HSBC, Barclays or RBS, over a 12 month period. If, but, you took the exact same loan on the exact same duration with a quick payday loan company, you will be taking a look at repaying ?1,982, which means mortgage loan of 150%, some have actually also greater rates of interest.
You are wondering why then do these firms charge this type of high interest rate if their clients usually are cash-strapped currently. This boils down to risk. Somebody with a lesser credit rating is at greater risk of default, meaning they may stop paying. Therefore, to counteract this problem, these businesses charge much bigger quantities, which ideally encourages clients to spend their loan right back faster. Continue reading “Is this the beginning of the final end for pay day loan businesses?”