The Wonga forum has kicked off to a great start with lots of user activity in the one month since going live. Having recently surpassed 500 registered users, we are very pleased with its steady growth and usage.

Already accruing a stockpile of solutions to frequently asked questions, we can see this is going to be a valuable resource going forward. Plus we’re beginning to see organic conversations developing amongst customers, which is really exciting for us!

One user recently took the opportunity to submit a question to Errol, our CEO. They wanted to know how Wonga works, to which Errol gave a prompt response! If you’ve got something on your mind, whether it’s a question for Errol or simply something you’d like to share with other users, we’d love to hear from you.

Visit the Wonga forum today and join the discussion!

When blogs or newspapers cover Wonga, or someone spots our TV ad for the first time and tweets about it, it’s rare that our typical APR doesn’t get mentioned. Indeed, it’s often the main talking point and people who don’t understand how the equation works (which is most of us), can leap to some scary conclusions. After all, we’re trained to compare APR when assessing the value of credit, yet there are two major problems with using APR to gauge the cost of ultra short term loans. 

For starters it was a measure designed to compare rates of charge on an annual basis, for traditional loans of a year or more. Yet the credit market has changed and when it’s applied to very short term loans such as a Wonga cash advance, it grossly distorts the actual interest charged - by not only multiplying, but also compounding it many times over. Take a Wonga loan of a week - actual interest charged is around the 7% mark, yet the official APR is over 2,000%. It’s so distorting that the APR number keeps going up as our loans becomes shorter and therefore cheaper - doing the exact opposite of what you’d expect a value comparison tool to do. 

It’s a view that was supported by the OFT when they published an interim report on short term credit, saying: “Consumers appear to find the inclusion of the total repayment amount more helpful than an APR in understanding the cost of short-term credit. This may be due to the information distortion which results when an APR is applied to low sums over short periods.” 

Secondly, APR applies to some credit products, such as short term personal loans and credit cards, yet other ways of charging for emergency cash are exempt, namely extortionate overdraft fees being used by UK banks. Which is where the headline for this post comes in… Yep, it does say two million percent.

An amazing story from the Observer tells of an Alliance & Leicester customer being charged £80 for going 15p overdrawn for eleven days, which equates to actual interest of more than 50,000% and a theoretical APR in the millions. So while we don’t believe APR is a helpful measure for consumers - certainly not based on our own customers’ feedback - the actual charges being made by High Street banks are the truly eye-watering numbers of the financial world. Yet they don’t affect everyone and can usually only be found in the small print, so they frequently go unnoticed.

Whatever you think of Wonga’s typical APR, we clearly and transparently calculate the cost of our tailored loans up-front and, to give you a quick example, the unfortunate bank customer in the story could have borrowed £150 from us over the same 11-day period and paid £22.37 in interest & fees. That’s roughly three-and-a-half times less the cost of bank’s charges, to borrow 1,000 times the amount of money!

Sure it’s an extreme example, but British banks are charging up to £20 per day on unauthorised overdrafts and only the fact they won a recent court battle, plus there is no headline-grabbing APR to calculate, means they keep getting away with it. It’s estimated UK banks made more than £2 billion from these charges last year alone, meaning it’s a huge source of revenue they will keep fighting to protect.

Wonga’s flexible loans and sophisticated risk and decision technology had us in the spotlight once again. We were recently included in the Smarta 100, a list of the most exciting, promising and disruptive businesses in the UK as selected by a handful of top entrepreneurs.

Although the Wonga forum was not yet developed at the time of this award, there’s no doubt that Wonga Bill Pay and the Wonga iPhone app helped clinch this coveted spot. Not being one to rest on our laurels, we’ll continue to add innovative new product lines to the Wonga arsenal to keep our tech-savvy customers happy.