i've posted it as a reply on qotw
but the original post is quite far down and chances are it'll be closed before anyone replies.

many people this week have bemoaned 'payday loan' 'instant cash' companies. we all know they're just loan sharks hiding their fins behind pinstripe and marketing, but can somebody please confirm whether my maths is right here? i honestly can't believe i'm right.

if a loan of 100 quid is taken on monday at 2356% (pretty average apr from these guys), by tuesday morning one owes just shy of 650 quid, and by the following monday a couple of ton under 5 grand.

am i right or wrong? because if i'm right... how in the name of christ can that be legal?
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:03, 27 replies, latest was 16 years ago)

By my reckoning by Sunday you'll owe the GDP of Mali
a blowjob and a packet of jelly tots
( Naked Ape call me Caitlyn, Thu 22 Apr 2010, 9:05, Reply)

thankyou for your contribution
but shall we let others have a turn?
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:07, Reply)

you may find that that was the most sensible contribution you get

( Vipros. clever got me this far, then tricky got me in, Thu 22 Apr 2010, 9:09, Reply)

No

( Naked Ape call me Caitlyn, Thu 22 Apr 2010, 9:30, Reply)

I'm no lawyer
but if you agree to enter into a contract where you agree to such terms as a huge APR, no matter how stupid you might be, then it's not illegal.

Surely?
(ConanTroutman thought we would free the vulture, Thu 22 Apr 2010, 9:10, Reply)

i see your point
but i mean how are the fsa/ oft allowing them to set the rates so damned high? knowing full well that the only people who take them will probably be the lowest 5% iq-wise, who have not one iota of a chance to pay it off?
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:12, Reply)

and anyway
if it went to court, can you honestly see a judge ordering someone to pay back 200k+ (assuming 1 year) from a 100 pound loan?
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:22, Reply)

In short, no.
You make a good point there.

It seems a bit extreme that the companies in question would use baliffs, etc. to claim back what they're owed, but it's the only other thing I can think of.
(ConanTroutman thought we would free the vulture, Thu 22 Apr 2010, 9:25, Reply)

they probably have baliffs called big baz
who kindly remind you your payment is due with a quick shot to the kneecaps. in all seriousness though, i'm really considering baiting an MD into saying something super-incriminating on tape under the guise of an interview and sending it to the tabloids
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:33, Reply)

I think that the APR is so horrific
because the loans themselves are to be bridging loans over a matter of a week or so but they are still obliged to print the APR. Certainly the interest charged over the bridging preiod isn't going to be pretty but I suppose it is what it is.
(SpunkyMcSpunkbubble Diddled your nubbin on, Thu 22 Apr 2010, 9:30, Reply)

but take for example
that kev and sharon need a ton til next week to buy cider and food for't' kiddies. kev earns minimum wage packing meat in a factory just off the estate. when he's paid, he'll have to give his entire salary to the company to pay the loan, and presumably take out another from another company with limited morals to cover the month ahead... thereby kickstarting a huge and awful spiral into tens of thousands worth of debt.
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:40, Reply)

you know that the A in APR stands for annual, right?
So 2356% = around 6.5% per day. Not nice but not the numbers you were using.
( The Light in Chains don't touch the Pope's boner, Thu 22 Apr 2010, 9:43, Reply)

fully, thanks
but i don't see how that's relevant? still extortionate rates whether you pay them back in an hour or a decade.
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:46, Reply)

are you sure you divided by 100?
Percentages are tricky things.
( The Light in Chains don't touch the Pope's boner, Thu 22 Apr 2010, 9:48, Reply)

haha

( Kitty v1.0 desperately naive, Thu 22 Apr 2010, 9:50, Reply)

I'm not saying hypnoticme is functionally innumerate, but
No, wait, I am.
( The Light in Chains don't touch the Pope's boner, Thu 22 Apr 2010, 9:54, Reply)

thanks
would you like some gloat with your superiority?
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:56, Reply)

Always
It's the icing on the party ring of my triumph
( The Light in Chains don't touch the Pope's boner, Thu 22 Apr 2010, 10:02, Reply)

i thought the equation would look something like this
100x2356/(7x52) [Amount x APR/Time Frame] - although my maths skills aren't exactly skills
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 9:53, Reply)

Replace APR with (1+APR/100)

( The Light in Chains don't touch the Pope's boner, Thu 22 Apr 2010, 10:00, Reply)

Your maths is way off
The instant loan companies basically lend you, say, 100 quid for a fixed fee of something like 25 quid, to be paid back within a week/month.

So you borrow 100 quid, and, a month later, you owe 125 quid, but that's the end of it. The APR they quote is the APR you would have to be charged if you did the equivalent loan with a traditional bank loan, credit card, overdraft or similar.

www.wolframalpha.com/input/?i=100+GBP+loan+at+2356%25+for+1+week
( le brian, Thu 22 Apr 2010, 10:00, Reply)

That is the first time I've seen anyone actually using WolframAlpha

( crackhouseceilidhband Fuck off back to Mumsnet, Thu 22 Apr 2010, 10:25, Reply)

It's the only good use I've found for it so far

( le brian, Thu 22 Apr 2010, 12:09, Reply)

.
thanks for clearing that up, my maths is notoriously awful
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 12:51, Reply)

Okey dokey...
£100 x 2356% = £2356 nominal interest payable in a year (not taking into account monthly compounding of interest).

£2356 / 365 = £6.45 interest per day

Tuesday: total loan outstanding = £106.45p
( Colonel Dracula Two manky hookers and a racist dwarf, Thu 22 Apr 2010, 10:23, Reply)

That's what I said just with less condescension
I'm not allowed to condescend to my coworkers so I take the opportunity online when it arises.
( The Light in Chains don't touch the Pope's boner, Thu 22 Apr 2010, 10:34, Reply)

no hard feelings
"i'll try being nicer when you try being smarter" :D
(hypnoticme is an anarcho-syndicalist commune, Thu 22 Apr 2010, 12:52, Reply)