Would you take out 4,000% interest loan?

[santa]

Wonga are what some would term a "legal loan shark".

With their high margins, they've been heavily advertising here in the UK. They also sponsor one of Saturday night TV's big programs here "Red or Black" and even sponsoring soccer clubs too.
A lot hate them,but many seem to be suckered in too and use these "loans" on frivilous things or from poor planning and get caught into a downward cycle of debt.

I think this is a great example of a marketing strategy to make something more socially acceptable with certain subgroups, using cognitive disadance in a marketing campaign and language used and of course...the sidewalk mentalities that help sabotage people



Seeing this "new" type of business based a lot on sidewalker mentalities (and encouraging them) and then seeing how certain subsections take them as normal (i.e. advertising on TV, so they must be socially acceptable and for high profile TV programs and sports clubs= more social proof), made me wonder how other more established "sidewalker" mentalities and social norms may have begun or evolved.



Selected Quotes;
(from http://www.guardian.co.uk/business/2012/mar/01/wonga-real-cost-payday-loan )-The whole thing and some of the comments are worth a read. I've included some background below and some "customer stories" to scan through.

Wonga.com's corporate style is unremittingly cheerful. Apply for one of their online loans and, provided your application is successful, you'll get a series of happy messages, dotted with upbeat exclamation marks, giving an account of the progress of the loan. "Great news! The money will be with you in a jiffy." And a little later: "Great news! We can confirm £100.00 has just left Wonga and is winging its way to your bank account at the speed of light (well, extremely fast anyway)." Pay it back, and you'll receive a grateful text that tells you: "Thanks! We've just collected our Wonga repayment without a hitch and we're all smiles."

Wonga describes its concept as a convenient service for an internet-savvy group of consumers, the Facebook generation, people who are used to getting things fast, who feel "disenfranchised" from the traditional banking system. Loans can be made quickly on most smartphones and the money is often delivered to bank accounts in minutes. Staff believe that in time their services will have the same revolutionary impact on banking as Amazon had on the book industry.




Wonga does not expect to be one of the companies driven out of the market, and the company's advertising strategy tries to set Wonga aside from the myriad of evocatively named rival online companies that offer money if you Google payday loans: Kwikcash, Loans for Women, QuickQuid, Toothfairy, Payday UK, Payday Express, GetCashToday.co.uk and Peachy (which has a "representative" APR of 16,381%).


Wonga's staff are keen to position its service as more akin to bank overdrafts, than to rival payday lenders. "We believe that we are in sector on our own," Bowman says, in a basement boardroom at the company's headquarters in a grand house on the edge of Regent's Park in central London, its white stucco gleaming in the spring sunshine. Among a number of awards on display is one naming Wonga.com as last year's fastest-growing digital media company in Europe. "We see ourselves as an internet technology business first, and a finance business second," Bowman says.



Staff say 1 million people visit the site and "hundreds of thousands" of loans are made each month. The company's turnover trebled between 2009 and 2010, to £73m turnover, and Errol Damelin, the co-founder and chief executive of Wonga, is reported to have taken home £1.6m last year.



Susan gets around £600 a month in benefits, and recently when she was struggling to pay back a large, overdue bill, she took out £400 with Wonga. She can't remember the term, but if she'd kept it for a month, Wonga would have charged her £130 for the service (£61 for a fortnight) – a huge extra chunk out of the £600 she has to live on. "You are going to have to pay a higher level of interest when it's quick money," she says, happy to accept the cost because no one else will lend to her. Anyone with a reasonable credit rating, and regular income, could get that money for a month for free on a credit card or interest-free overdraft.


Asked if there's an uncomfortable dissonance between the breeziness of the brand and the desperation felt by their clients who accept their high interest rates because they have limited alternatives, Bowman laughs. "Maybe I've been brainwashed, but I just don't see it like that."
Staff appear frustrated by what they see as the paternalistic concerns of debt campaigners, and argue that their customers "aren't stupid", and are quite able to understand the interest rates they're signing up to.


The company has already attracted formal censure over its cheerfully casual approach to taking on debt; in January it was forced to remove a page from its website that suggested its loans had advantages over student loans (neglecting to mention its APR of 4,214% and the current student loan rate of 1.5%), and inviting students to borrow money from them for things such as holiday flights to the Canaries. The proposal was condemned variously as "cynical", "predatory" and "irresponsible". The Advertising Standards Authority took an earlier, equally jaunty ad off the air, ruling that the "light-hearted presentation of the ad was likely to mislead about the nature and implications of the product". Transport for London was criticised for a sponsorship deal it agreed with Wonga.




"The reasons Wonga exists are not funny reasons. People don't go to Wonga happy and cheerful. When you haven't got any money you haven't got any choice," a 29-year-old man, who works in recruitment, says. He asked not to be named, worried his parents might find out that he owes around £2,000 to half a dozen different online lenders, and is borrowing more each month to pay off the interest.

Some of the sidewalker customers;

Customers' stories

Four customers who gave detailed accounts of the severe difficulties that taking out a Wonga loan had caused them, all said they had turned to Wonga because they had no other way to get credit.
Yomi, 55, a council worker, saw his salary drop two years ago (after 23 years in the sector) from £46,000 to £28,000, when he switched from temping to a more secure post, anxious to ensure he had steady work at a time of rising redundancies. He took out a Wonga loan in October 2010, when the eldest of his six children began university and needed £900 to pay for his accommodation. Although his wife is also working, both have long, expensive commutes, and there was little left from his £1,700 monthly take-home pay after the £650 rent and £600 petrol had been paid. He had defaulted on his mortgage a few years earlier, and is unable to get a credit card or an overdraft from his bank. He went to Lloyds, Barclays, Nationwide and none of them were able to lend him the money he needed, so he tried Wonga.
"I started seeing these advertisements on television, for Wonga, on the buses. The idea that you could get a loan within minutes. The temptation was there to see what they could do for me. I wasn't looking too much at the small print," he says, talking in a side room in his office during a lunch hour, out of earshot of colleagues, who he thinks would be amazed to know about his payday loan problems. "I was surprised they didn't refuse me. The way I saw it at the time, I thought I am in financial turmoil and they are able to help me."
If you borrow £400 for 35 days, you accrue £145.48 in interest and fees, and £545.48 is taken out of your account automatically the next month. But Yomi was already having problems making ends meet before he took the loan, and there was no chance of his salary increasing the next month. So he had to take out a second loan to make ends meet until payday.
"When they take the money out of the account, that reduces your disposable income for the month; halfway through the month I had no money so I took out another loan with Wonga. Once you start it, you don't stop. Unless something happens, you have to go back to bridge the gap," he says.
Occasionally he would go to other online payday lenders to get new money to pay off Wonga and over the course of a year he deferred paying the Wonga loan back on several occasions. In the end he told Wonga he couldn't pay back, and they have entered into a debt repayment plan with him, freezing his interest. He calculates he has paid back around £1,500 in interest to a variety of different online and mobile phone lenders, because of his initial decision to take out the £400 loan.
The experience has been a profoundly unhappy one. "I worry about it all the time. Especially when we come to payday. I have sleepless nights. It made me start drinking for a stage until I realised that drinking was costing me more money. I haven't told my son. I'm trying not to push my anger on to my kids. I go into my shell, into my room," he says.
He is unsure about what he feels about Wonga, and blames himself as much as them; he's grateful they helped him pay his son's accommodation fees. "They are providing a service, you should give credit to them, but it is exploitative," he says.
When he sees the logo on buses and football shirts he thinks: "Yes, they are doing that because they are getting so much money from me." He recommends that people needing short-term cash should find a local credit union, such as the Waltham Forest Community Credit Union, which helped him out.
On the morning I meet him, an email has popped into his inbox, with the subject: "Yomi, does payday seem a long way off?" There's a picture of Wonga's three pensioner puppets, and a Wonga promo code offering him a £5.50 discount on fees if he takes out a new loan.
"Obviously that's not ideal," Bowman, Wonga's head of marketing, says when I show him a printout of the email. He says he can't comment on individual cases, but admits that it is never going to be possible to get all lending decisions right and he adds that the promotional email hasn't actually come from the Wonga, but has been sent out by an affiliate.





The company argues that these cases of people forced to come to Wonga because they have no option are unrepresentative and state that its internal research suggests that that 70% of people who use the product do have access to other forms of credit. It argues that people come to Wonga because they are happy to pay a premium for the "speed and convenience offered by an online service".


Why take the bus?

Asked why anyone would take out a loan like this if they had any other choice, Morwood, Wonga's head of PR, replies patiently: "It's a bit like me saying why would you take a black cab, when you can take a tube or a bus for the 10th of the price? It's not about price ... There are times when jumping in a black cab and paying whatever the difference in price is worth it. It's not something you do every day." It's an awkward analogy because it seems to be missing the point that a great number of their customers are jumping into the taxi on the never-never, because they cannot afford the upfront cost of taking a bus.


John (not his real name), a 29-year-old who works in recruitment and earns £17,300, is probably more the kind of customer that Wonga thinks is typical. He borrowed money from them on several occasions to go out with his friends, most of whom earn more than him. Because of a previous bad debt, he has no overdraft or credit card.
"I couldn't get money any other way. I didn't want to borrow £80 off my parents just to go out and drink beer with my mates," he says. He saw Wonga advertised on television and laughed when he saw the APR, but he liked it when he tried it. "It didn't feel expensive. I know it is expensive, but when no one else it able to help you out, you have no leeway. If a company is able to lend you that money and they take £25 or £39 off you for it then that is absolutely superb," he says. He began taking out loans on his iPhone, as he walked into town to meet friends; the money would be in his account before he reached the cash machine.
"I would say I am bored this weekend, I have no money. I will take out £100, and see my friends and worry about paying on payday," he says. His Wonga limit quickly built up, allowing him to borrow more and more, to a total of £1,000. "It is hard to explain, thinking about it. I am not sure how it went from a few loans to a lot. It is weird. They are so easy to take out. When you are doing it, you don't realise the impact. You think, my friends are going out, I could go out too, and a few taps on the laptop ... I would go to Wonga, max that out and then get £750 from another one. "
He liked the way there was no need to talk to anyone, no paper bills that his parents might see. "Because it's done online, there's no human interaction, it is a lot less difficult ... it means that I can hide it. The online is a huge aspect of it. I wouldn't want to talk to somebody about it. The web doesn't ask questions. The website wouldn't judge me.
"I first noticed that I was getting into trouble when I had to get another payday loan to survive to the end of the month, rather than it being a bit of extra cash in my pocket. At the moment I am in dire straits. Since I have taken out one to help me survive the month, I haven't cleared them off. I've always had one or two a month rolling over."
When we talk he has no idea how much he owes. "I'd like to be able to say this much, but I honestly don't know. I could guestimate, £1,800-£1,900. I am under no illusion that I am the victim. I know I'm not a victim. I'm know I'm the idiot in the scenario." He no longer goes out with his friends, as he can't afford it.
"By the middle of the month, just before I go to sleep I will have a worry about it. By payday it is all I think about. It is all consuming. People notice that I get grumpy and miserable. It affects all of my life."

Here's one of their ads, it could go into the marketing section aswell I guess.
Interesting to use of puppets and making them older aswell. Clever marketing stragtegy

Listen out for the use of the word CONTROL-irony

[video=youtube;CjY0mbh8fxU]http://www.youtube.com/watch?v=CjY0mbh8fxU[/video]

Another one, notice the use of drum and bass music and touching fists -appealing to the younger audience too. Great juxtaposition with the older aged characters;

[video=youtube;x8aEV519Uhw]http://www.youtube.com/watch?feature=player_embedded&v=x8aEV519Uhw[/video]

Some of the youtube comments;

doesanyone know if anyone has made these 3 into dolls?? i would love to buy one.

If you want a cheaper Wonga loan use promo code nhd54

Love this add. So cool.

Love these adverts ^^

I would imagine the positive comments are people are more likely to be (or become sidewalkers) in their financial approach to life

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[The-J]

That's such an excellent idea for a business.

I mean, what they do is predatory and a bit f*cked up, but I have a couple thousand dollars sitting in my bank account at the moment. If I lent it at 4,000% APR, compounding monthly with no interest-free grace period, I'd be sitting in cash by the end of the year.

 

[Kak]

I love it. Why didn't I think of this????

My opinion, they shouldn't market an annual interest rate when the loan is extremely short term. I would give an equivalent rate for just the days of the loan. 10% per day outstanding sounds better.

 

[The-J]

I love it. Why didn't I think of this????

My opinion, they shouldn't market an annual interest rate when the loan is extremely short term. I would give an equivalent rate for just the days of the loan. 10% per day outstanding sounds better.

If compounding daily, there must be some sort of interest free grace period. maybe 2 weeks?

We dont want sidewalkers knowing we are taking their money...

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Kak]

No grace because then they can get free money and pay it off during the grace.

 

[santa]

That's such an excellent idea for a business.

I mean, what they do is predatory and a bit f*cked up, but I have a couple thousand dollars sitting in my bank account at the moment. If I lent it at 4,000% APR, compounding monthly with no interest-free grace period, I'd be sitting in cash by the end of the year.

I love it. Why didn't I think of this????

My opinion, they shouldn't market an annual interest rate when the loan is extremely short term. I would give an equivalent rate for just the days of the loan. 10% per day outstanding sounds better.

I think legally they may have to say the equivalent APR for the year. Though in fairness I think if you don't may back on your loan in term, they keep charging for "only" a couple of months and then its frozen and you can go back on a debt repayment scheme or something like that.



I nearly did title the thread "Would you lend at 4,000% interest"!
Interesting you guys picked up that- as there is definatly exploitable gains to be made for those with cash and the know-how to lend. I was reading in a UK paper on Monday about someone who set up a lending firm with fixed assets as collateral, who's business is up since the credit crisis knocked the confidence of much mainstream lending.

 

[Pete799p]

I would take out a 4000% loan if I had an order that would yield a 5000% profit.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[The-J]

I was reading in a UK paper on Monday about someone who set up a lending firm with fixed assets as collateral, who's business is up since the credit crisis knocked the confidence of much mainstream lending.

I read one of zen*******'s posts; he said that he does things like that. They don't pay, he gets even more than he loses. Zero-risk game.

 

[GPM]

We have "cash stores" like this ALL over Canada. Literally on every single block of retail areas there will be one. Every strip mall and tiny community store area will have one.

I had an ex girlfriend who had a kid (~3 years old) who would take these out every single week. She was literally throwing away hundreds of dollars a week on these. I was a university student with a part time job at the time. I sat her down and spelled out exactly what she was doing, and showed her how if she paid these off and stopped using them just how much more money she would actually have (she didn't NEED to take them out, she had a job, she just needed to adjust her spending to AFTER she got paid and not before).

I ended up loaning her $3,500 to pay off all of her ultra-high interest debt, and was going to charge her the same interest that the loan on my Line of Credit was costing me. I am pretty sure the day after I gave her the money she was out there taking out more loans! To a broke-arse student, staring at a $3,500 good will loan that you will never get back really sucks.

We broke up maybe 6 months later with me never seeing a penny of that. I cut all ties with her as she was a cancer and treated every area of her life like that. The only reason I didn't try to take action against her was because of her kid, I felt so sorry for the guy. After we ended it the little guy had no more positive role models in his life but I just could not stay.

Sure these loan places are complete sharks, but lots of the population that take from them would find other ways to waste their money anyways. How does that saying go? "If all the worlds money were evenly distributed, one year later all the wealth would be in the same hands as it was in before the redistribution". Something like that, and it is completely true.

 

[100k]

Yes, but only if I could default on it and have the government bail me out.... like they did to the financial sector in the US/UK!

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[The-J]

I come back to this thread really interested in getting started lending this way.

I don't have no $100k or anything but I have a little bit of cash and income that's not coming in anytime soon. I don't wanna spend these savings.

Since I'm a Fastlaner at heart, I would never borrow at these insane rates. I would, however, lend at them! 1% interest a day on the money I have in the bank would quickly turn into a livable income.

I don't know if it's possible to actually provide your money to services like this and take a nice profit on your money or if it would be wiser to start something small myself. But this is the closest thing to easy money there is.

EDIT: Did some googling, found some things. I'll update it as I go

http://www.ehow.com/how_6924535_become-payday-lender.html

http://www.ehow.com/how_2387274_follow-payday-loan-lender-laws.html

It's risky of course

 

[Mike39]

 

[campbellronald7]

I would take out a 4000% loan if I had an order that would yield a 5000% profit.

I am thinking the same.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[CEBenz]

Lol wonder if we could do a Fastlane Forum INSIDERS Venture...

 

[DeletedUser2]

Lol wonder if we could do a Fastlane Forum INSIDERS Venture...

sure, how much are you putting in?

 

[CEBenz]

sure, how much are you putting in?

I'm still broke but could probably cough up a couple grand within a couple weeks. I have no idea if you're serious. Of course I'm sure there would be a few for the money manager.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[CommonCents]

2011
bp185 mil rev
bp45 mil profit
bp77mil debt writeoff

wow! lol.