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Comment by shubb | Hacker News Reader

Yeah, this is an important point. When I said bulk, I meant £10 of stuff, rather than the massive quantities you can get from Amazon.

I think instant pay day loan companies like Wonga have done a lot for the cash flow problem. Personally, I've never used them, but if you have a bill and need to avoid a £50 late penalty, you can get a $100 loan at 1% interest a day, which is a brilliant value proposition if payday is a week away. I've seen a lot of criticism of these companies, but I think it's from people who don't understand the problem.

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1%?? Lol they charge 150% where I live until the regulators clamped down on them and class action lawsuits happened. Now it's $50 maximum per week they can charge, but they get around this with NSF fees and late charges.

They also hit bank accounts with EFT withdrawal up to 3x per day if the first one didn't clear, which is $40 NSF charge each time. Unfortunately because these lenders signed a piece of paper allowing for automatic withdrawal, the payday loan company then steals all your money the day before you are paid, so your account will be debited -$200 for a $100 loan you missed a payment for, factoring in all the NSF and late charges. Since most people are paid with direct deposit nothing they could do to stop this. Bank will also charge interest on the overdraft.

So on payday you have nothing, and are forced to go back to the payday loan company just to survive but are now paying even higher interest, because you defaulted once. Sounds like they are well regulated where you live but not here they are still loan sharks.

1% a day is 360% a year, which sounds very high, but is less than missing a payment sometimes. You would use them when it made sense, and borrow an amount that you could pay back. Many people are paid weekly, so it might cost £5.

Things were very bad in the UK until recently, and in many ways still are, but the companies have come under a lot of regulatory pressure, and are being... better. I'm afraid that sometimes you have to choose between 2 evils.

People are not dumb, and 1.2 million (3/100th the population) took a payday loan in 2009. You could credit a lower number to individual poor judgment, but these are rational economic operators borrowing small amounts at high interest rates to avoid hunger or larger losses due to cash flow problems.

WONGA, one of the most popular in the UK quotes APR of 4214%!

Of course that sounds worse than it is because the loan is short term.

Still though, I wish there was a more reasonable solution to this problem. I wonder how much of these rates are due to the risk involved in loaning to the sort of people who take these loans and how much of it is "because they can".

I believe that's the real tragedy (the last phrase)

My bet is that most of the people that use these services couldn't make a simple interest calculation

Most of these sites will show the amount of interest due so I don't think it's so much that issue as it is the issue that taking out one of these loans increases the chance that you will need to take out another one of these loans the following month which is a much harder calculation to make.

If you go to www.wonga.com, you can fiddle with the sliders and see how much a payday loan costs in the UK. For instance, if you borrow £100 for 10 days, you're paying back £115.91, which is just over 1% per day. I can definitely imagine someone accepting that to pay for an urgent cost.

I expect that if you don't repay when you agreed, though, you're going to end up paying a lot more.

150% a DAY??

And the loan companies cry that it makes them impossible to do business if they're capped at still wholly usurious rates.

Payday loan companies are f'king evil and ruin peoples lives.

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