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200 % APR On A Loan? The Unauthorised Overdraft Scam | Anorak

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Why Would You Pay 4,200 % APR On A Loan? The Unauthorised Overdraft Scam

WHY would you pay 4,200 % APR on a Loan? Strangely, the answer is because it could be cheaper than getting an unauthorised overdraft from your bank.

Wonga, the short-term loan business, claimed last week that it was more transparent than the banks, after the Independent Commission on Banking (ICB) said customers were confused by the welter of charges associated with their current accounts.

Errol Damelin, the founder of the company, said customers could not compare the cost of borrowing money in the short term when the most common way of doing it was through a bank overdraft.

Wonga is forced to display a representative annual percentage rate (APR) for its loans of 4,214pc. However, Mr Damelin said that, because it offered loans limited to 30 days, the APR was not relevant, and the loan was often cheaper than unauthorised bank charges for the same amount.

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Posted: 20th, September 2011 | In: Money | Comment