OT interest rates

No, not an error. But also a misunderstanding on your part. The APR for payday loans is high because APR is calculated at an annual interest rate and is therefore taking a loan which lasts only a few weeks and multiplying it as though it was a year ? leading to APR?s that run in the thousands.

Many of the people who take these type of loans tend to re-cycle them though.

on 30/10/2017, JoeJoe supposed :

..and the borrowers are high risk - unable get a loan anywhere else.

That's a different issue.

Not an error, the percentage quoted is if the loan is held for a year . Usually these loans are(should be) less than for a week or so. If the loans were used as advertised ie the boiler breaks on a Wednesday but you have no spare cash till Friday then these loans are fine. However lots of the people who take these loans (rather than the banks say) tend to get another loan to pay this one etc so paying a fortune in interest.

No, the interest rates are insane. They're for people that don't understand maths. I can't imagine a court upholding such rates but I'm not an expert on that.

NT

Oh its true. Remember in businesses where there is no security for a loan all the bmugs end up paying for those who end up never repaying it. They do take the piss. I think they should have a rate set more realistically for the length of the loan then a steep increase if the folk default. I'd certainly never use one of those, its more of a rip off than credit cards. Brian

If the APR is 2100%, then that's the interest rate. The borrower may only be paying that rate for a few weeks, but it's still phenomenally high.

If my maths is correct, it's just under 30% interest per month. For comparison, most credit cards charge under 30% per year.

Of course, the APR calculation includes all costs, and these tend to be fairly small loans. A £200 loan pays costs around £60 in costs and interest per month. If it is loaned and paid off within a month, £60 is not an awful lot to cover all the admin effort involved, let alone make a profit.

I assume the companies make their money from people rolling these loans over endlessly. If no interest is paid, the loans more than double every

That is what I was meaning, if you don't repay and they can find you you get clobbered but still the rates are in fact still high in the short term ofr nobody would make any money out of unsecured loans. Think about it would you give a strange loads of dosh? Brian

Its related - "sub prime" loans are more expensive since they reflect the higher risk the lender is exposed to.

?s that run

Payday loans are very profitable and very risky.

NT

The two adjectives tend to cancel.

They expect around a 20% plus failure to repay rate. And these are often the start of personal bankruptcy.

the opposite is true, otherwise no-one would touch high risk investments

NT

I'm bad at remembering names, but isn't tabbypurr one of your sock puppets, TNP?

Bankers are inherently stupid and always repeat their mistakes.

That does not really make sense... for a loan to be a worthwhile asset to the lender there has to be a balance in the risk and reward. Therefore "safe" loans tend to attract poorer returns than more risky ones. Pretty much the same story for any investment.

CC's are only a rip off, if you don't repay them on time. I have used one for many years and never paid a penny over the amount I have spent on the card. My CC is paid off in full, straight from my bank account each month, which earns interest on the money spent on the CC, until it needs to be paid off.

Of course, anyone that knows anything about ibnvestment knows that. A communication issue no doubt.

NT

The Financial Conduct Authority is the relevant body, rather than the Courts. Because of concerns about the rates, the FCA capped the interest rate at 0.8% per day in 2015. Before that, APRs of over 4000% were not uncommon.

They also restircted late payment charges to no more than £15 and limited the maximum amount to pay, including all fees and charges, to twice the amount borrowed.