I always get really frustrated when I read articles on payday loans. They always seem to say the same thing, it’s shocking, daylight robbery, unfair to the poor, 4000% interest etc. The never look at why they are so popular, they only ever talk about what happens when it goes wrong and they never, ever come up with an alternative. Take today’s article in The Guardian for example.
Quite what payday loans have to do with Cameron I have no idea?. They have, in their various guises, been around a lot longer than he has. Now ignoring the sob story about the Granny who begged not to be given a credit card because She couldn’t trust herself, but was made to take one anyway, a chunk of the article is taken up with the authors alleged experience whilst working under cover for Provident Financial Group. Which isn’t a payday loan company. It’s a credit supply agency.
There is a huge difference between payday loans and doorstep loans. As the name suggests, you borrow money from Wonga or whoever under the agreement that you will pay it back, in full, plus interest and a small fee, come next payday. With Provident or who ever you take out a loan over 6, 12 or 18 months and agree to pay it back, with interest, over that period. What both systems have in common is that they allow those with none existent credit ratings access to credit. Yes, the interest appears staggering, but these are businesses that run a high risk of not being paid back, and no one loans money for free.
There is obviously a huge market for this type of finance, so why is that?
It’s simple, you try getting an overdraft these days, or a small loan from the bank. You go into a bank and ask if you can borrow £250 for a month. They cannot do it. They will not do it. If used sparingly, wisely, and you stick to the agreement, payday loans are absolutely brilliant. Take Wonga for example. If you borrow £300 over 30 days you will payback £395.89. Now that sounds like a lot, but if you pay it back early you pay less interest. If you pay it back the next day it will cost you just £8.51. Which is a hell of a lot less than your bank will charge you, should you bounce a direct debit or go overdrawn.
Have you ever tried paying off a bank loan before it due?. Also, what most people won’t tell you is that if, for some reason you are unable to pay it back on time, all you have to do is phone them and arrange a payment schedule. They will then freeze all interest on the account and you can pay it back at leisure. The only penalty is no more credit till the debt is paid. Try getting your bank to do that on a loan.
Provident Loans are also excellent. You agree a weekly payment, normally a tenner, collected from you at your house, if you can’t pay one week you say so and agree to double up the next. It doesn’t cost you any more, there are no late payment fees. There is no bank on earth that could do that.
Now if you take one of these types of finance and then decide you don’t want to pay it back, you deserve to get shafted. Provident will, and often do, come to arrangements where the debtor can pay a token £1 a week. However, very few of the agencies will go to any great lengths to retrieve their money.
They’ll send it out to a debt collection agency, who’ll come banging on your door. They won’t take you to court, they won’t try and make you bankrupt, and they won’t take your goods or house. Unlike most banks. They don’t need to. It’s just not worth it. The individual amounts they loan are small and the interest they make overall more than covers their losses.
Yes there are idiots out there that will take loans they know they can’t pay back, or too many of them. It’s a bit like all those people that took mortgages they couldn’t pay, or credit cards they didn’t need. However, for the everyday person, with good or bad credit, payday loans and doorstep loans really are fantastic value for money.
They are quick, once accepted with Wonga, it takes less than 15mins (online) from application to money in the bank. With Provident you can phone them, request a loan and within hours someone will come to your house, with the money. You simply cannot get that speed, or service from a bank.
I would say to anyone needing a new exhaust 2 weeks before payday, or a small amount to tie them over, don’t bother with the bank, go straight to Wonga. Don’t listen to the horror stories, they simply have no grounding. Obviously, if you are an idiot, in the habit of borrowing and not paying it back, it is already obvious why Wonga is the only place that will give you credit, however, if you fail to pay them back they will simple refuse you anymore credit.
I do not work for any of these companies, in case anyone is suspicious as to why I think they are so good, I am simply a Mum of 3 that has, on occasion, hit the skids financially. In the past I have used both Provident and Wonga and really cannot fault them.