Monday, 17 September 2012

Wonga payday loans soar

Whatever you think about payday lenders, the latest figures from Wonga show how this new method of lending, often over the internet, is catching on.

Wonga's loans quadrupled last year to nearly 2.5 million, despite the fact that it turns down most applications.

And its profits soared at a similar rate, to £46m.

Yet Wonga is just one player, albeit a big one, in a burgeoning industry.

Just to remind you, it lends small amounts, with a £400 maximum, for a few weeks at rates which can be made to look sky high if they are annualised.

The official APR or Annual Percentage Rate which Wonga has to show on its website is 4,214%.

(Wonga "explains" that it doesn't lend for 12 months and , even if it did, the true rate would be more like 360% - though that still sounds like a lot to me.)

So why the success?

People like the convenience and simplicity of payday loans, despite the cost. Many can pay it back easily, others are desperate.

Some are finding it harder to get short-term money elsewhere. Credit card providers and lenders are more choosy.

And new technology, along with the internet, means that the loans can be made available almost instantly - and customers can be assessed ultra-quick.

No business can carry on growing at these rates forever, but there's no sign yet of the payday lending boom coming to an end.

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