Loan-ly at Christmas?

What sort of Christmas are you going to have? 

Buying presents at Selfridges? An M and S Yuletide? or is it Poundstretcher for you?

I was skint last year, but my kids didn’t seem to notice the difference between the dolls I got at Poundstetcher and the expensive ones I’d bought the year, before when I was on decent wages.

But even if you are feeling the pinch, there’s another way. Why not take out a pay day loan? Wonga, Quick Quid, Peachy, Peachy, Pounds to Pocket and loads more just can’t wait to deposit money into your account.

They make it sound so easy, Wonga simply say

“The Representative APR is 5,853% so if you borrow £150 over 18 days at a rate of 365% p.a. (fixed) you will repay £183.49. Includes £5.50 transmission fee.”

Quick Quid quite happily say The Representative APR is 1,362% so if you borrow £1,200 over 10 months at a rate of 300% p.a. (fixed) you will repay £2,831.34

Just look at those lovely percentages.

The problem comes in that most people are in severe difficulties and are desperate for £150 but the average person uses that money to pay off other debts that they also can’t afford to pay. 

When the end of the month comes, they often can’t pay back everything to the Pay Day Loan Firm, so they happily lend you more money and you may enter a cycle of debt that’s hard to ever get out of.

I spoke to Dave, that’s not his real name, who works for a debt management firm in Greater Manchester.

He said “Our firm deals with literally thousands of people who have got themselves into major financial problems. We try to sort out their debts. I can’t believe these Pay Day Loans firms are allowed to operate at these interest rates. They make a contract where they automatically take the money out of the person’s account.

Ok maybe people should not be so foolish with their money, but these firms make it sound so easy to borrow, the problem comes in when someone takes out one loan to pay off another.

Banks are offering loans at roughly 15 % these days but it depends on the persons credit history.

If they have poor credit, banks may not offer them a loan. Or at much higher rates. Often the pay day loans companies only offer the money over 30 days, they give an example of borrowing over 18 days but the customer may not be offered those terms “

Recently a survey found that there are four times as many people ending up at the Citizens Advice Bureau asking for help because they are in trouble with pay day loans that they are having trouble paying back

Of course we all remember the story in the bible of Jesus overturning the money lenders tables. The Church decided to take a leaf out of their leader’s book to have a pop at Wonga. 

Archbishop of Canterbury Justin Welby ended up red faced when he found out that the Church of England had actually invested a stake in Accel Partners, a US venture capitalist firm who helped finance Wonga.

The Daily Mirror recently found that the Queen makes money by renting out an office to Wonga, it’s a lovely property in Primrose Hill London. The Queen is, ironically for the Archbishop, also head of the Church of England

MPs are launching an investigation into Pay Day loans firms, but what will they do?

Tax them and they’ll just put up their interest rates. Ban them and the politicians will be putting the Pay Day Loans staff on the dole. Cap their extortionate interest rates and politicians will legitimise their existence.

Errol Damelin and Jonty Hurwitz founded Wonga, 

the idea being to lend quick cash to tech savvy young people, but the reality is that it’s the poorest and least financially educated who usually end up using pay day loans. 
The 2 business founders made £50 million between them last year. I’m sure they are going to enjoy this Christmas.

So will I, but I’m happy with a pair of socks 
and a bottle of whiskey for presents. 

Moral of the story? There’s plenty of options and advice out there, but if you haven’t got it don’t spend it.