Buy now, pay later? Wonga's new offering...

19 December 2012

Not content with targeting the inebriated and the students among us, Wonga’s latest offering in a search for unwitted unwitting consumers is a retail Buy Now Pay Later scheme, imaginatively entitled PayLater.

Currently being piloted with one online retailer, The Cotswold Company, this move into longer term loans is a sign that Wonga don’t wish to remain as purely one of the bottom-feeders, but have their sights set on loftier targets, like those who have to buy their own furniture. The  maximum loan length for a payday loan is 45 days, but the new scheme offers loans for up to three months at 7% interest. No that’s not 7% interest per annum, that’s 7% per three-month period. Still, the APR of  27.7% does compare favourably with the 4,214% APR levied on Wonga’s payday loans.

But is this a viable option for consumers? Furniture stores are famous for offering years of free credit to buy things, so why should people think about taking out credit that costs? Well, much like the payday loan industry, interest-free credit requires a credit check, and if you don’t make the grade, you won’t get the credit.

So perhaps we would be better off comparing PayLater with credit cards then? The Wonga PayLater fee is paid when the order is placed, so a purchase costing £100 would cost consumers £7 upfront, plus three repayments of £33.33. Total cost of credit is £7.

However, Andrew Hagger of Moneycomms.co.uk said the new service did not compare well with credit cards. "If you were to pay for £100 worth of goods on a credit card with a typical APR of 18% and pay off £33.33 a month over three months, you'd end up paying about £3 in interest," he explained, making Wonga more than twice as expensive. Funny that.

In fact, given that interest rates for personal loans are also at an all-time low, it could be that the only thing Wonga’s PayLater is cheaper than, is, um, Wonga. A £100 payday loan for 45 days (half as long, but the maximum permissible) would cost £52.32 in interest.

Wonga insist this is an innovation to meet a genuine need, and even offer to waive the fee if shoppers cancel an order within 14 days. Good job Wonga are such nice sorts. Either that, or they are simply complying with the distance-selling regulations and trying to make it sound like a perk of the deal…

So is this an essential service being offered to those who absolutely positively need some furniture but don’t have the credit record, or just another way for Wonga to make money? What do you think….

TOPICS:   Debt   Loans

10 comments

  • Kevin
    If you don't want to pay high levels of interest don't take out a payday loan. That you can't get an overdraft or normal loans might show you that you shouldn't be borrowing what you can't afford in the first place, even if it is to stop granny freezing to death or little Timmy having turkey on Christmas Day. Start taking responsibility for your actions if you sign up to something.
  • Michael
    "So is this an essential service being offered to those who absolutely positively need some furniture but don’t have the credit record, or just another way for Wonga to make money? " Can't it be both?
  • Natty
    @Kevin Sound if not boring advice but any one letting their granny freeze to death or even suggesting that is a better option than borrowing a bit of cash to make sure she doesn't is a complete arse in my book. So start taking responsibility of your granny, little Timmy can fuck off.
  • qwertyuiop
    The irony here of course is that "grannies" are being used to sell Wonga. Grannies can fuck right off. If they don't have the pensions to cover their essentials then that's their problem, no-one elses!
  • Chewbacca
    So.. they're offering a service to those who would otherwise be unable to afford certain items. Ok then.
  • Sicknote
    1. It was your fault that you didn't try hard at school and thought that A' Levels were for specky wankers 2. It was your fault you got knocked up at 16 3. It was your fault that you into a little trouble with the Police 4. It was your fault that you couldn't quite understand APR when you signed up for that NEXT account 5. It was your fault you didn't save for a mortgage and got pissed every weekend So, it's your fault that you need to go cap in hand to legal loan sharks like Wonga. Time to man up and stop your fucking grizzling about how bad this company is.
  • Christopher J.
    By now pay a lot later more like
  • Tim B.
    @Christopher Jones - no, just 3 months later.
  • Mike O.
    @sicknote Yo! Go go go
  • Sprocket d.
    @ Sicknote What's the weather usually like in Malta at this time of year? I have heard it can be quite warm with a few scattered clouds about, is that correct?

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