An article in the Times this week about personal loans highlights how banks and other lenders seem to be fighting to offer the worst loan deals at the moment - in a potential bid to curb demand. Despite gargantuan cuts in the base rate recently, a cheap loan is becoming harder to find than a new Christmas number one for Cliff. Here’s an extract:

The cheapest loan available is now 8.2 per cent – that is more than four times the base rate at 2 per cent. Experts say that providers may actually be trying to price themselves out of the market as the availability of credit continues to be squeezed.

Several providers have increased personal loan rates in the past four weeks – including Barclaycard by 2 per cent, Sainsbury’s Finance by 1 per cent, and Britannia building society and Lombard Direct by 0.5 per cent.

At the same time cheap bank loans are vanishing, the number of lenders who are willing to help out is also shrinking:

Lending on personal loans dropped by 26 per cent in October in comparison to the same month last year, according to uSwitch.com. Whilst six months ago borrowers could get rates of 7 per cent or less, all of these deals have now disappeared. Moneyback Bank, which consistently offered loans as low as 5.5 per cent over the past two years, has closed for new business completely.

Last year almost 1.3 million people took out an unsecured personal loan to consolidate debts – but with interest rates rising and credit being harder to obtain, less borrowers will have that option.

If you’re having trouble finding a cheap loan, or any loan at all, now might be the perfect time to try a short-term Wonga cash advance. You will need to pass our online credit check but, unlike the banks, we lend cash to tide you over for up to 30 days, so we’re not looking to predict your reliability over several years. You also won’t be left making repayments for years either of course!

We regularly hear from Wonga customers with stories about unexpected bank and credit card penalty fees. It’s an issue that’s been widely covered in the media and there are loads of websites now set-up to help consumers reclaim questionable charges from the likes of Barclays.

So this won’t be the first blog to offer views on much maligned overdraft fees, but we’ve recently heard from several people who’ve had a lot to say about Barclays Personal Reserve. So we checked it out for ourselves and had to laugh at this thinly veiled attempt to replace unauthorised overdraft fees with… Personal Reserve fees! 

So what is a Personal Reserve? Well you’re welcome to check out the Barclays site for yourself, but we’d suggest it’s a new name for describing a double overdraft. You see Barclays kindly gave their customers a Personal Reserve earlier this year (you have to opt out, much like Gordon Brown’s recent donor card proposals). It’s essentially an additional “buffer” overdraft that sits on top of your existing overdraft facility. It’s also a potential cash cow for Barclays - you’re not supposed to use it regularly of course, but we rather suspect they’d like it if you did. 

True, the previous unauthorised overdraft fee of £35 was done away with, but a Personal Reserve fee of £22 is payable every five working days you’re using it, even if you’re just a few quid overspent! Compare that to taking a short-term Wonga loan for five days, which will cost you £10.70 - less than half the cost. And we don’t ‘assume’ you’ll want one either. Worse still, imagine going £100 into your Personal Reserve for five consecutive 5-day periods (the maximum allowed) - you’d be charged £110 for the pleasure!

There’s a distinct possibility that banks will be forced to scrap their huge fees for unauthorised overdrafts, so this was most likely a pre-emptive move by Barclays. That might sound like good news for consumers, but the reality is that banks are unstoppable money making machines and, as tough as recent times have been for them, they will always find new ways to generate revenue.

There’s nothing surprising or wrong about that of course - they are businesses after all - but when it becomes harder to generate cash from consumers, transparency is often the first casualty. And there wasn’t too much of that about in the first place! If overdraft fees do bite the dust at any point soon, you can bet that new, potentially even more stealthy ways will be found to make up for the lost income.  

So full marks to Barclays for creativity and proactivity, but bear in mind that at the same time they decided all their customers deserved a Personal Reserve, they scrapped interest paid on positive balances in personal accounts and raised the interest charged on standard overdrafts. It seems a case of ‘giving’ with one hand while taking with the other.

Only a Wonga cash advance is a truly fast loan. ‘Well you would say that’ we hear you cry! But it pays to understand the difference between Wonga and other pretenders to the fast loan throne.

Wonga is not the only website claiming to offer people fast loans at the moment, but sometimes claims can be deceptive. We like to keep abreast of what’s going on outside of Wonga Towers and we like to know what kind of competition we’re up against. So we regularly try out some of the other websites for ourselves and it’s amazing how often boasts about ’same day loans’, ‘loans within an hour’ and ‘instant loans’ turn out to be pie in the sky!

Indeed, there have been occasions when our testers have been waiting for several days for a loan they applied for online - about as much use as a chocolate tea pot if they had genuinely been in need of emergency cash for an unforeseen expense.

So next time you want to tackle an urgent cash flow problem with a fast, short-term loan, trust Wonga to deliver. We’ve talked about some of the other reasons we’re different on this blog before, but speed is undoubtably our main strength if you need urgent funds. We’re the Usain Bolt of the consumer credit world and we’re here to help you in a flash for those ‘Wonga moments‘ when time is everything. If your application is approved we’ll deposit the cash within an hour (usually minutes), no matter who you bank with, what time it is, or what day it is. Now that’s a fast loan! As for the others, don’t always believe the hype!

There are many reasons why a Wonga loan is different to a traditional loan, but perhaps the most fundamental point is that we make money when customers repay their cash advance. ‘So what?’ you might think, ‘Surely that’s normal.’ But in the world of unsecured personal loans and credit cards there’s a cast iron rule that usually goes unspoken… They generally make money by keeping customers in debt for as long as possible!

In an industry where new customers are won on low headline interest rates, cash is often made by other means. These tactics include long repayment periods, fixed terms and penalty charges.  

Even in these uncertain times of soaring inflation, nationalised banks and restricted lending, many rules of traditional credit still apply. Indeed, while there has been unimaginable turmoil in banking, true innovation in the way services are offered to consumers remains a rare thing. The credit industry is such an ancient one that in times of trouble it’s common for lenders to become even more cautious and rigid.

The best advice is to make sure you fully understand the terms of any form of credit agreement before taking the plunge. Always read the small print and, in the case of personal loans, check for early repayment clauses. Otherwise you could find yourself handcuffed to your debt for longer than necessary.

Or you could visit Wonga.com instead! At Wonga we have no desire to keep you in debt and the entire service is geared towards helping you manage your cash flow with short-term credit - on the odd occasion when unexpected expenses strike. You can choose exactly how much cash you need and exactly how long you want it for. That means you’re in control and you settle the debt quickly. 

Our commitment to responsible lending also means you won’t find any hidden charges even if you decide to repay your loan early. We will actually welcome it!

A recent article in the Times exposed a flood of complaints from angry Barclaycard customers, who claim the monster bank may have been using dodgy tactics to extract fees from them.

They say they have been hit by late payment charges after their normal repayment date was shifted without warning…

 

Not since British Gas introduced its woefully inadequate boiler breakdown cover or TalkTalk underestimated demand for its “free” broadband have we received so many letters on a single subject. The sheer scale of the correspondence suggests an orchestrated attempt by Barclaycard to confuse borrowers into missing their payment dates so that it can levy extra interest and charges. Worse still, to judge by the letters we have received, the lender appears to be targeting borrowers who usually clear their balances in full each month.

Barclaycard’s inadequate explanation is that it gives all customers a minimum of 20 days to pay from the date that a bill is generated, but that this payment window can be as many as 32 days. It says that the date can change because of weekends, Bank Holidays and, crucially, “operational expediency” - a vague notion that can only mean “whenever we wish to boost profits”. This is simply not good enough.

It sounds like another example of the banks being about as clear as mud when it comes to the cost of their services. Wonga will never change your repayment date, but you are always welcome to bring it forward! We won’t charge you a fee if you decide you want to repay a cash advance early and save interest.

It’s an extreme example of the potential harm caused by an inaccurate credit history but, according to Thisismoney, a businessman is claiming he could face eviction after an incorrect black mark was placed on his credit record…

A businessman says he could lose his home after a mobile phone firm wrongly told credit reference agencies he had not paid his bill. John Peters believes the blunder by O2 ruined his credit history and triggered a chain of events that threw his finances into turmoil. As a result, the 42-year-old, who runs an internet business, fell behind on his mortgage payments and he, his wife and two young children now face being evicted.

While it’s questionable just how instrumental the error was in leading to the serious financial difficulties which Mr Peters now faces, it highlights how important your credit record can be and why you should never assume all the information held about you is accurate.

You can request to see your credit file from any of the three UK credit agencies - Call Credit, Experian or Equifax. These sites also offer advice about protecting and improving your credit rating, which can have a serious impact on the cost of borrowing cash.

Remember that using Wonga responsibly is a great way to quickly improve your credit rating too - check out this earlier post for more information.

A recent survey by the Halifax has found students owe an average of nearly £220 on credit cards - adding to the potential long-term debt they’ll graduate with.

Here’s another statistic (for what statistics are worth!). The average student leaves uni owing some thirteen grand! Incurring this kind of major debt seems to have become an accepted part of education these days.

If you’re about to start a degree yourself, here are a few tips to bear in mind…
• Minimise student loans by only taking out what you need, not the maximum available
• Try taking out small Wonga loans for occasional emergency costs, but only when you know you can repay the cash comfortably within a month. That way you clear the debt within 30 days, not some years after you graduate
• Draw up a budget of your income and outgoings - and stick to it
• Shop around for banks offering student accounts with no charges
• Make the most of student discounts - many retailers offer them and you won’t get these kind of reductions again until you hit retirement age!

The Times has written about recent research from Moneyexpert that exposes another ruse by banks to secure even more revenue during the credit crunch and ongoing regulatory pressure.

The article highlights how the best savings rates are being reserved to tempt new customers, while existing customers are often seeing the interest they can earn reduced. Instant access accounts are being worst hit, as the banks look to tie customers in with products that come with a long-term commitment. Here’s an extract, but you can read the whole article here.

Banks and building societies have slashed interest rates for loyal customers with instant access accounts as they look to lure new savers with eye-catching offers on long-term fixed-rate products.

The credit crunch has created a “dash for deposits” with rates as high as 7.2 per cent paid on fixed-rate savings. However it is only long-term savers, happy to lock their money away for extended periods, who have been the beneficiaries, an analysis by Moneyexpert.com, the comparison site, has shown.

The average rate paid on instant access accounts has dropped from 3.76 per cent in January to just 3.3 per cent now, said Moneyexpert. Northern Rock’s Silver Savings account, for example, paid 5.75 per cent in January but has since been cut to 5.02 per cent.

Your credit history can be a big factor in the cost of borrowing. Like a school report, good behaviour is rewarded, but if you don’t play by the rules it’ll be noted by the credit bureaus and your grades will suffer!

Lenders may penalise you with higher interest rates, or refuse to lend you anything as a result of a poor credit rating, although it’s worth noting that many banks will be looking to assess your potential profitability as much as any risk of non-payment!

Your credit history looks at current debt, bill payment and a number of other factors. It may seem strange, but not using credit can be as bad for you as behaving badly with it. Lenders are looking to rate your reliability in the past, so if you’ve not yet proven you can be trusted you’ll be classed as higher risk.

Using Wonga.com can actually help improve your credit rating - and fast. This should never be the sole reason for applying for a cash advance of course, but it’s a very useful bonus and could mean better deals from potential long-term lenders in the future.  

Wonga is good for your credit rating because we carry out a credit check as part of our sophisticated decision process. When you take a short term loan from Wonga we create a SHARE account, which is a way for lenders to see the past behaviour of potential customers with other companies. Thanks to our hi-tech systems we update this information very rapidy with good news, everytime you repay a cash advance on time.

It means other potential lenders, such as mortgage providers, banks and credit card companies, get almost instant visibility of your trustworthy use of our service. Anecdotal evidence from testers and customers suggests it’s a very quick way of improving your ‘FICO‘ score, which is a rather mysterious rating used by some credit bureaus and can play a deciding role in applications with some lenders.

Leading financial website thisismoney.co.uk reports that many credit cards have bumped up their interest in time for the holiday season. Quel surprise! Not only are standard interest rates on the up, but charges for using cards abroad and withdrawing cash from the hole-in-the-wall have also taken a sneaky hike. Here’s an extract from the article:

The increases are a hammer blow to families heading off on summer holidays, which generate the biggest card bills of the year on items like hotels, food and car hire.

Britons are expected to spend £22bn on credit cards during July and August. With 13.8m customers regularly failing to pay off their balances each month, the rate increases will bring a cash bonanza for the card companies. Almost one in three customers have faced a rate rise in the past year.

Credit cards have their uses of course, but it’s the fact that 13.8m customers regularly fail to pay off their balance, plus the frequency of interest rate changes, which can sting. It’s essential to fully understand the terms of any credit offer before committing, but the trouble with credit cards is that terms can then change during the life of your card and the banks want to keep your balance running indefinitely.
They can provide cheap credit, but also hidden charges, changing costs and the risk of a spiralling balance. A small, short term loan from Wonga on the other hand may cost more in some instances, but the total amount repayable is always explained upfront, with total clarity. The interest rate won’t ever change during your loan and you repay it within a few days or weeks, depending how long you want to borrow the cash for.
We make money when you settle your loan and clear your short-term debt, not by continually extending a growing line of credit and bumping up the fees every once in a while!