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Business “pay day” loans

Payday-LoansI think this image is appropriate. The neon lights of a seedy clip joint

Everyone is fully aware of the rather nasty little sector of “payday” loans exploiting the less than wary members of the public struggling with their finances. Wonga are of course the prime example and their use of fake solicitors letters summed up their values.

But its not just individuals who have fallen prey to extremely high cost loans. I recently assisted a client who was paying an apr of around 70%. How did it come to that?

The key is in how these loans are presented to the client. Generally they will quote a daily rate of interest in monetary value and this may well sound manageable but frankly it doesn’t take much effort to translate that into a APR

There is also the issue of default. For some lenders it is more profitable for the client to default and of course there may well be charmless relationships with insolvency practitioners.

The key as ever is knowing your lender. Premium lending does have a role and will always be required. Borrowers want flexibility but they also require a professional approach and a lender who sees the borrower as a client rather than a source of short term exploitation

That is why I have taken care to know the lenders well and research their reputation in the market.

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