I was shocked to read the small print on the Wonga.com ad. They offer short-term loans at an astonishing APR of 2689%. That’s right, I haven’t missed a decimal point. It’s an interest rate of two thousand, six hundred and eighty-nine per cent over a year.
Every lender has to quote the APR, by law. It’s supposed to be a standard measure for consumers to judge one loan against the next. But it doesn’t apply to short-term loans that are supposed to be repaid within a few days.
The company would quote their real interest rate over 1 week to be more like 7% (cheaper than a bank loan).
The point is, if you don’t pay it back on time, you’re stuffed.