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Payday loans: perfect for ‘plane tickets to the Canary Islands'

Unbelievably, Wonga is telling students that their expensive payday loans are a great way to help budget at university.

 
Payday loans: perfect for ‘plane tickets to the Canary Islands'

I’ve never liked payday loan companies.

They charge astronomical interest rates, prey on the financially vulnerable and encourage irresponsible borrowing.

However, just when I thought my opinion of payday loans couldn’t sink any lower, a Wonga marketing campaign targeting university students crossed my path.

You have to hand it to them; young, impressionable students who have just moved out of home and are learning to budget for the first time will likely prove a most lucrative market…but really Wonga? Really?

Wonga informs its young audience that while a student loan is fine to help pay for university and living costs, they also encourage you to live beyond your means – ‘it’s all too easy to fritter away the money once you have it’.

Wonga’s solution to this problem therefore is to suggest students take a student loan to cover the essentials and then use its own short-term loans to fund emergencies and any unexpected expenses – like ‘plane tickets to the Canary Islands’….

‘In the time it takes to check your email and Facebook, you can have your loan request approved and the money transferred securely into your bank account. You won’t miss out on that cheap plane ticket offer and you can start saving money for a fantastic holiday with your mates’.

Yet, Wonga has a representative APR of 4,214%. This means that if you borrow £400 over 30 days you’re looking at over £125 in interest and fees.

If you then can't afford to repay your debt within the specified time you will be charged a further 1% interest a day up to a maximum of 60 days.

In comparison, the interest rate on a student loan is inflation, as measured by the retail price index (RPI), plus 3%. This rate will then be reduced once you’ve graduated if you’re earning under £41,000.

You also don’t have to begin making payments until you’re earning over £21,000 – not the £15,000 Wonga claims.  

Furthermore, you can choose to repay your debt earlier if you want to – and though the government has said it may charge a penalty for doing so it’s unlikely to be in the realms of 4,000 APRs.

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23 comments so far. Why not have your say?

Pat Murphy

Jan 11, 2012 at 18:27

Seeing how creative Wonga are with this....could George & Dodgy Dave be encouraged to approach them to ask them for suggestions from Wonga about how to get the UK economy moving, as the Govt are showing no signs of any innovation or initiative whatsoever!

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Paul Gill

Jan 11, 2012 at 18:42

No need to say anything really its just the way we have all allowed society to go, nothing is surprising.

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abbass hassan

Jan 11, 2012 at 18:42

shame on you , blame the goverement for no reform .

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snoekie

Jan 11, 2012 at 18:43

Creative with facts as well, because I doubt that they would tell the students of the huge amount that is payable for each day they are late, unless pressed, and then probably the questions would be ducked until they were nailed to the floor...............

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Franco

Jan 11, 2012 at 18:52

They should shut them down, put a retrospective tax on them of 50% of their sales revenue and then jail the CEO for 3 years and one day.

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Nemesis

Jan 11, 2012 at 19:00

It would be cheaper to miss the bargain flight and pay full price than take out the Wonga loan..

£100 loan = £4000 by end of year . That is a very expensive flight.,

Or it would be cheaper to buy a business class seat than get a wonga loan for a bargain basement fixed date non-refundable seat

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Keith Snell

Jan 11, 2012 at 19:19

No doubt this Wonga student loan is approved by the FSA who argue its transparent and the Directors have to be paid $5billion each + bonus to carry out such a generous scheme in case they leave the country, as wonga is having to pay the going rate for bankers to keep them here.

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briman

Jan 11, 2012 at 19:41

The first adult lesson, everything borrowed has to be paid back, so you had better be clear how much you are being charged for the privlege of using money which is not yours.

University is the place to start standing on your own feet and taking adult decisions. If the higher educated cannot see through the Wonga tripe then they are probably wasting their time being at university.

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Jacob Holden

Jan 11, 2012 at 20:05

great innovation to be honest, they are very clear on their website about how much they charge...in fact they couldnt be any clearer, if you're stupid enough to use it for a student loan then you deserve that level of interest. although if you borrowed £100 and didnt make a repayment for 7 years the final sum would be 14 trillion.......WOW

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dr ray

Jan 11, 2012 at 20:33

Any idea how Wonga expect to be paid back since a student would not have an income or assets and there would be little point them taking legal action unless the loan is guaranteed by the parents.

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Oxfordshire Investor

Jan 11, 2012 at 21:00

Franco got it right but far to generous to the thieves at Wonga. The real question is, "where are the FSA in this totally inequitous business?" Having dealt with them in other financial disasters, I imagine they are taking their cut.

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Ryan McC

Jan 11, 2012 at 21:38

Another epic example of the cronies! The FSA is merely one of many bodies established merely to purport the benevolence of our ostensible 'leaders'. The majority of the population are not educated enough to be aware that these cronies are simply taking the piss or rather taking every penny they can. These statements could actually be refuted, however, the fact that Wonga companies are permitted to exist provides corroboration. Few within the younger generations now are conditioned to plan for tomorrow. Rather they are conditioned to spend, spend, spend!!! The current mindset is 'sure you only live once'; 'you could be dead tomorrow'. This mentality of living for today is reinforced though 'buy now, pay later' bombardments and similar advertisements. Whilst these statements are underpinned by truth, the mentality of the younger generations today omit to acknowledge that 'maybe i will be living tomorrow and might need some money to survive'. If people are conditioned to spend, spend, spend and the means to do so are deliberately provided (e.g. a plethora of credit) then what are people going to do??? Yes, they are going to spend, spend, spend! The functioning of the macroeconomy is deliberate otherwise it wouldn't occur in the first instance. It is highly unlikely so many Governments globally can be incompetent - please be aware of that people! We are the puppets and who do you think is pulling the strings?

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Natalie LP

Jan 12, 2012 at 09:11

I agree with briman, it's not like they are targeting playschool attendees, it's university students! I pray that we are not accepting students into university if they are insufficiently intelligent enough to know what a con these payday loans are. Most banks offer interest-free overdrafts of £1,000 or more to students anyway so with a bit of luck, students won't be too impressionable and hasty with their financial decisions.

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Michael Brooks

Jan 12, 2012 at 13:50

As a young man, when I first got hold of a credit card I used it for all sorts of things like petrol for the car. All these small payments and others mounted up and as a result there came a time when I ran out of money two weeks into the month and had a rude awakening. I would like to think I wouldn`t have taken out a payday loan had they been around then, but I had no other debts and was still living in the parental home, so I cannot say for certain. The whole payday load business is frightening, and the targeting of students is verging on the wicked.

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MC

Jan 12, 2012 at 16:00

Pay day loans "keeping the poor poorer!"

See also; store cards, doorstep lenders (posh loan sharks) and any lease hire companies like Brighthouse.

These types of businesses need to be shut down and the poor in this country need to learn to save for what they cannot afford, rather than end up paying for it 5 times over.

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MC

Jan 12, 2012 at 16:09

I think a simple change in the law would suffice to sort this out. If a lender charges more than 15% (old credit card norm) then it forfeits the right to personal recourse.

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In the Dark

Jan 12, 2012 at 18:56

So! you all have a dicky hissy fit over Wonga promoting itself to student and demand legislation for the sake of your pious moral taking high ground. Reminds me of the self rightous middle class that masquerade in the Labour party ba humbug.

Get real, our young people need to learn about these doggy businesses and how to spot them and walk away. YOU need to develop a relationship with your child/children that helps and assists their development, the state cannot be trusted on these issues.

If it is important enough for you to have a concern, then show some leadership and explain it to the next generation, but no you require the government or one of it agencies to do your dirty work.

The eduction of young people starts with parents, face up!!

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Ryan McC

Jan 12, 2012 at 22:17

@In the dark...I for one was never educated by my parents, at least not always in a good way. Their ideology was to teach their children (my siblings and myself included) to indulge in alcohol and anything destructive basically. So we all can't rely upon our parents to teach us wisely. Thankfully i was intelligent enough to rebel against my parents advice. This is why the education system (provided by the Government who are elected by their constituents) should be one of the main sources of wise creeds. So yes, our Government, it's servants and agents, should be involved in the education of the children of today. Is that not one of the reasons why we have a Government? The Government works (at least it is supposed to) on our behalf; we should not be doing their work!

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Herman Brodie

Jan 13, 2012 at 08:22

Have You Been Wonga’d?

Check out this article. Compared to what we consumers will sometimes do to ourselves when it comes to money, even Wonga can start to look like an angel.

http://www.unexpectedutility.com/behavioural-living/have-you-been-wongad

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In the Dark

Jan 13, 2012 at 18:02

@Ryan McC you have have a point and I will not patronise you. But I did say starts with parents and I trust that your experiences will provide good leadership and motivation for young people in your environment. Since all I can do is trust.

As for Government, I pay through my taxes, that in my eyes makes me the customer. While I appreciate that we need an excellent education service. To trust this to total strangers and assume that they have my children's or any child's best interest at heart can only be establish through a watchful eye.

As for Government showing any wisdom that is a new one on me, especially after the past 13 years and even this current lot need a watchful eye.

So in a nutshell I trust Wonga to pursue their business and the Government to continue with educating our young. But I certainly do not trust either with my money and the important aspects of my life, buyer be ware.

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Zaydac

Jan 15, 2012 at 14:12

I agree with MC - abolish personal recourse for loans carrying an interest rate above a reasonable level and tie that level to a sensible benchmark. The delinquent borrower would forfeit their credit rating so there would still be an incentive to repay.

Then replace the FSA with a competent organisation.

But none of this will happen.

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Zaydac

Jan 15, 2012 at 14:16

Supplementary comment: Any company that sells products that only an idiot would buy must inevitably end with customers who are idiots. Like Cattles did. Remember them?

BTW Wonga have taken the offending page down.

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Simon Taylor

Aug 23, 2012 at 16:45

I don't agree with the opprobrium being heaped upon this outfit.

Sharks? Yes. Crooks? no. What they are doing is wholly legal if rather smelly.

The sooner young people realise that the financial services industry is out to screw them , the better. If they learn that lesson whilst at university, and it costs them no more than £125.00 on a £400.00 loan for a flight, then that will save them thousands later on in life if it makes them wary of managed pensions, structured ISAs, interest only mortgages and other scams that the 'industry' has devised to pick peoples pockets.

You pay to learn.......

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