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Gold, cash, credit. - Ed's journal
Gold, cash, credit.
OK, so whilst on holiday not so very long ago, I had access to a TV. This is not a usual occurance, but I haven't really missed it.

Anyway, what I spotted was a company called 'Quick Quid' offering 'pay day loans'.
It's where they offer you cash _now_ that you repay with interest on pay day.

But what .. actually quite horrified me is the APR on those loans.

"Typical 2356% APR"

I've found another one that will offer you a 30 day loan, and charge you £25 per hundred you borrow. Which ... is 25% a month.
Or 1455%/year.

Seriously? Do we have people who are so out of control of their finances that that looks like a good deal? I'm used to the notion that a credit card that charges 25% A YEAR is a bit on the high side. My current credit card is 16.9% APR - I could do a bit better than that, but I wanted a charity card because of the way I spend on it. So that's 1.313%/month. (Slightly higher 1.941% if I want a cash advance, rather than paying by card). Although technically speaking, my interest rate is 0%, because you get a month (up to 30-59 days depending on when your statement is due) interest free.

Not 25% a month. Not 1455% a year. That percentage is an easy number to read - it means that over the course of a year, you give them nearly 15x what you borrowed.

That ... well, frankly that just disgusts me. If you have someone who's having financial difficulties to the point where they can't do that, then they're pretty close to the wire, financially. That's not helped by offering credit at that sort of term and rate.

Credit cards aren't particularly cheap borrowing either - they're just convenient.

The sites in question:

The really horrifying thing though, is that these companies _aren't_ the last resort. They're just louder about shouting 'pick me, pick me' when someone's really suffering.

You have credit unions - that aren't well advertised, because they're voluntary/profitsharing entities.
Stuff like:

There is a credit union in Coventry, too - but they don't have a website, they're that ... well, focussed really.

But deals are similar - the Rugby Credit Union offers around 13% APR (1%/month), and they will lend to people who might otherwise be rejected for credit from a larger, profit making organisation.

Seriously, these 'pay day loans' are bottom feeding parasites - they don't even offer a 'last resort' sort of a service.

On a related note, we have similar bottom feeders buying gold. You must have seen the adverts - 'gold in the post, cheque by return'. And yet, it seems they have trouble with the notion of paying a fair rate too - BBC Article on gold fror cash. In short, none of the companies doing it, offered more than half the value of the gold at first pass, and even with rejecting the offer, most didn't actually go above two thirds.
The worst offender offered £60 for around £300 worth of gold.

Again, this isn't a 'last resort' sort of a service, either. Gold is an internationally traded commodity, and it's got a published value per gram. LOTS of companies will buy gold, and whilst they're all interested in making a profit, most are happy with a sensible margin -
"We double-checked and took the gold anonymously to a number of shops in London's famous old jewellery market, Hatton Garden, specialising in scrap metal.
Sure enough, the best price we were offered was £318. "

Seriously, this sort of thing is ... at best, crooked, and at worst exploitative.
4 comments or Leave a comment
cthulahoops From: cthulahoops Date: December 23rd, 2009 04:15 pm (UTC) (Link)
While I agree that this is exploitative and evil, I'm not sure to what extent sensible alternatives exist for the target audience.

I know that my credit union will only lend to people who have savings on deposit, and I'm sure they do credit checks. Nationwide wouldn't even give me a current account for some reason, so I can't see any reputable lenders giving money to someone with a history of defaulting on credit cards.

Thanks for the gold related link, I've been curious as to how bad those sites are.
erjholton From: erjholton Date: December 23rd, 2009 05:26 pm (UTC) (Link)
It's a sign of the economy, sadly, that businesses like that are able to thrive.

Another place people can check is their own employer. There are some that will advance wage or salary which is then paid back through withholding from future pay. Of course, this is best done by people who are in good standing with their employer. It's worth the employer's effort as financial crises can seriously impact performance.

This pulled my nuts out the fire on one occasion (needed to move fairly fast, needed cash for the deposit + first month). I'd only been with the company for a few months but I'd already showed that I was a good worker and they were willing to stretch it repayments over six months, although I opted for just three.
purp1e_magic From: purp1e_magic Date: December 27th, 2009 11:34 am (UTC) (Link)
We saw that gold for cash advert on TV, and Simon says "Mummy, that's a great idea!" So we had a long chat about how those companies were twisting the facts and glamorising their bad deals. I explained that the better option was to go to a jewelers. It'll be useful to put numbers to the discussion.
purp1e_magic From: purp1e_magic Date: December 27th, 2009 11:36 am (UTC) (Link)
Oh, and I think those adverts are fantastic, as they provide a great opportunity to discuss and educate on the subject of financial prowess with children. I feel sorry for anyone taken in by them.
4 comments or Leave a comment