Money Watch – Personal Finance Blog

TXTLoan: Small, Quick Loans By Text Message (Just 994% APR)

You can now get a loan by text message. Yes, you read that right, by text message, thanks to TXTLoan:

Our customers borrow from us to cover minor shortfalls between their outgoings and next payday; to avoid penalty overdraft charges from their current account; or to deal with unexpected short term expenses.

TXTLoan is offering loans of £100 which you’ll receive in to your bank account “within minutes”. The amount you’ll have to pay back is £110, which must be paid back within 7 days. Because of the short pay back period, the APR works out to be a whopping 994%.

When signing up you’ll pay a £1 fee, and you can then associate your account with a mobile phone number and bank account. When you need the money, you send them a text and hey presto, instant money.

You’ll be wanting to make sure you can pay it back in 7 days time though – on the 8th day you’ll be sent a reminder which will cost you £25. By day 11, another £25 will be added to your account, and leave it much longer and you’ll find the £110 you orignally promised to pay back is now over £200. After 46 days, they’ll refer you to their collection agency – essentially the bailiffs.

The APR rate will no doubt get the headlines, along with the method of requesting the money, but TXTLoan is essentially no different to the other payday loan companies that have become  common recently.

The APR is so inflated because of the short length of the loan, but all of these services are OK as long as you are aware of when you need to pay them back and you’re sure that you’ll have the money available to pay them back. Like many other forms of loan, if you don’t think you can afford the repayments, you shouldn’t be taking them out.

With this particular form of loan, one criticism would be that it’s too easy to get the money – once you’ve signed up, you can request the money simply by sending a text – how many people will be enjoying a night out and texting for more money whilst a little worse for wear?

There are also cheaper alternatives, such as credit unions. Some may find authorised overdrafts are a better option, whilst credit cards, used carefully could also be a better route to take. But I’m guessing this service is aimed at those who can’t get either an authorised overdraft or a credit card.

Via The Guardian

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