Wonga is a relatively new service which promises that it will give you access to “the fastest, most convenient and best value small loans available in the UK”.
With Wonga, you’re able to take out loans of between Â£200 and Â£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 Â£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 Â£200, that’s 12.5% just by itself. (To be honest, I’m a bit unclear on APRs – does the 13.8%Â include the Â£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.
If you’ve used Wonga and have any thoughts on the service, I’d be interested in hearing about your experiences.