It’s very possible to come out richer using payday loans. Just ask Wonga.

18 September 2012

Wonga+TV+advertAh Wonga. The familiar face of payday lending that we all know and loathe probably doesn’t care whether it is loved or hated, as founder Errol Damelin waltzes off to his bank with Wonga’s threefold increase in earnings.

The short-term loan provider, whose indicative APR on personal loans is listed as 4,214% quadrupled the number of loans made in 2011 to almost 2.5m and increased its turnover to £185m. Nice work if you can get it.

And it appears Wonga can get the business, extortionate APR aside, after all, if you listen to Mr Damelin you would be in no doubt that he is, in fact, providing a service and that pesky APR percentages are entirely irrelevant.

Part of the increase in loans could be down to the fact that, even customers who may not have previously considered taking out a payday loan may have felt forced down this route owing to belt-tightening in the high street banks. Lack of access to regular credit is always going to feed the bottom feeding market.

Of course, this may not be the only reason Wonga is filling wallets. Criticised for advertising (without an APR) on the tube over Chrsitmas and New Year, which could be construed as taking advantage of the slightly inebriated, perhaps it is the ease of use that attracts customers. Wonga guarantees borrowers will receive their money within 15 minutes of approval, which is certainly accessible, but with 10 times more customers taking out loans via their mobile phones in 2011 and nearly 1,000 people downloading a Wonga iPhone app every day, is the access to easy credit just a bit too easy? Particularly for people who are likely to get themselves in debt and possibly don’t know better?

And Wonga’s reign is not destined to end with the downtrodden individual- the company launched a credit service for small businesses earlier this year, again offering a service “to fill a gap in the market resulting from a lack of lending by mainstream banks.”

Wonga small business loans range from £3,000 – £10,000 for periods from one week to 52 weeks. "Very often for small businesses that is all that is needed but they need it quickly. Most small businesses go to the wall because of cash flow problems not P&L problems," Damelin told The Guardian.  Of course, not being personal lending, Wonga is not required to show the APR on business loans, and this information is not volunteered anywhere on the site before application. Our best estimates put the the APR at something over 30%, double the rate of some credit cards that could be a better solution for genuine short-term business cashflow problems.

We wonder how many businesses, or people, will go to the wall next year because they can’t meet the interest charges…

TOPICS:   Loans   Debt   Banking

11 comments

  • Kevin
    If you use them then it is 100% YOUR responsibility. If you don't want to pay back a loan then don't take one out. They tell you up front (well on the website) what the costs are going to be. If you don't like it, don't take out a loan with them! Noone is forced to take out a loan. Personal responsibility seems not to be an issue these days. It's massively high if you take out a year long loan but that's the cost. The fact that the banks won't loan you the money is a bit of a clue that you probably can't afford it, but why listen to the professionals? It's up to you what you want to do, just don't moan if it costs you a fortune.
  • LancerVancer
    @Kevin If you use them then it is 100% YOUR responsibility. Not if you watched last weeks Watchdog. Offering to have funds in your account in 15 mins then not doing proper credit checks. Then taking massive amounts out of peoples bank accounts, even though they have not been near the Wonga webshite/app!! They seem to know when fraud is taking place but overlook it. As for your other points agree totally with what your saying. I know of lots of people that are jobless but still take loans out with webshites like Wonga.
  • Dick
    I don't have a problem with the APR thing. These are not meant to be long term loans, so why quote annual rates? Telling you (not actually you, but the fairly dim people that may need these loans) what they are borrowing and how much they will pay back and when seems more sensible to me. Tell someone they can have a loan of £100 and pay back £120 at the end of the month. Would they even know the difference between loans with APR of 20%, or 50%, or 100%, or 200%, or 400%?
  • OpenWonga
    It’s disappointing to once again see these same misconceptions about Wonga and fail to see the service from a customer perspective. Far from being “forced down this route”, all Wonga customers have a bank account and mobile phone and the vast majority have access to others traditional short-term credit options. Consumers choose to use Wonga instead because of its transparency (you know exactly what you will pay back up front), speed and ease of use. As for APR, it remains the biggest red herring of all. It is well known that it is a distorting measure for short term loans. The reality is that we charge 1% interest per day, on an average loan of 16 days, meaning most customers pay less than 20% interest. It’s a long way from the 4,214% APR we are obliged to state on our website.
  • OpenWonga
    @LancerVancer We do not overlook fraud. We take every case of fraud seriously and the idea that Wonga is a 'soft target' for fraudulent activity is not accurate. The reality is that we achieve roughly a tenth of the fraud levels seen as an average across all online transactions. Fraudulent deals account for <0.1% of all Wonga loans.
  • Me
    @ OpenWonga. Welcome to bitterwallet here are the terms and conditions: 1-You shall bum foxes 2- Chewbacca is a cunt and we just have to leave with it 3- Moff is the worst writer, but he thinks that we don't know it 4- Wtf is dis real?
  • CloseWOnga
    OpenWonga- Away and fuck yourself you cunt. You are preying on the poor... no point trying to dress this up. While some of the points raised above about responsibility etc... are legitimate; had we not been fucked over by cunts like you in the first place, then the poor bastards wouldn't be so skint. Does Wonga pay all its taxes to the Treasury? Or does the fuckwit that owns it pay into dodgy offshore trusts?
  • Inspector G.
    I've found that simply just paying the bill late, rather than taking out a loan to pay a bill is a much cheaper alternative.
  • Yue
    Targeting the poor and desperate. But it's ok because he is a tory party donor and we know they are honourable.
  • Idi A.
    1000 people a day are downloading the Wonga app? Why don't they just cancel their smartphone contracts and save £25+ a month?
  • block w.
    Oh fuck off wonga,you bunch of horrible parasites.I'd rather live on the streets than take a loan off crooks like you.

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment