Wonga: A new way to get small loans
July 1st, 2007
Wonga is not yet live, but this new service promises that it will give you access to “the fastest, most convenient and best value small loans available in the UK.
With Wonga, you’ll be able to take out loans of between £200 and £1,000, and you’ll have up to 30 days to pay it back. If you don’t pay it back, you’ll be referred to a collections agency, your credit rating will be affected, and Wonga will no longer lend you any money.
I’d thought that this might be a new service along the lines of Zopa (person-to-person lending), however, reading the website makes it sound more like a payday loan service - as they put it, it’s to “help you live your life until your next pay day”.
There is a flat £25 fee per loan, plus 1% interest per month. The APR quoted is a reasonably low 13.8% - but you’ve got to factor in the fee - on £200, that’s 12.5% just by itself. (To be honest, I’m a bit unclear on APRs - does the 13.8% include the £25 fee, or just the 1% interest? Answers in comments please).
I’m sure there’ll be a market for this type of loan, but it’s not something I’d be particularly happy about using. As I’ve mentioned before, I’m really interested in seeing innovation in personal finance products, done responsibly (to be fair, Wonga does try to show how it will be a responsible lender), but this doesn’t really do anything that isn’t already available, albeit may be cheaper than other payday loan providers.
Categories: Loans, New Products
1 Comment on “Wonga: A new way to get small loans”
Errol Damelin, July 14th, 2007 at 12:36 am
Actually there’s a lot that’s new and innovative about Wonga.
1. It’s super fast with approval within a minute and guaranteed same day cash.
2. Its super convenient with faxless, paperless loans processed 24/7.
3. Its much cheaper than a payday loan. Wonga.com lends up to £1,000 for up to 30 days and if we take the median as an example, then £500 for two weeks costs £27.50 at Wonga.com. A typical payday loan for the same time and amount typically costs £125.00! That is over 450% more expensive than Wonga.com so the cost difference is huge; and
4. Its responsible. Wonga.com only lends to people with regular income and who are in control of their finances. Wonga never does roll-over’s and is committed to always communicating honestly and accurately.
