Consumer rights group Which? has called for a clampdown on “irresponsible lending” as it emerged that almost 40pc of payday loans are taken out to buy basics such as food.
Borrowing money to buy food doesn’t sound like being irresponsible to me really.
One of the most responsible things you could borrow money for I would have thought. Feeding the kiddies……
The credit, which often comes at interest rates as high as 4,214pc, is used to pay regular household bills by 32pc of those who take them out, and rent by a fifth. Almost a third of those surveyed said that they had been hassled by debt collection agencies in the last year after using the lenders.
Which? executive director, Richard Lloyd, said: “It’s shocking that half of all people taking out payday loans have been unable to pay the money back
Puts that interest rate into perspective really, that default rate.
Say you’re lending out a total of £100. For a week. 50% default rate. Thus you need a 100% interest rate just to end up with the same amount of money at the end of the week as you started it with.
Convert to APR and you’re over 5,000 percent already.
And do note, this isn’t a problem that will be solved by lending through a credit union, cutting out the money thieving capitalist bastards. It’s just inherent in that default rate and the way that APR is calculated.