Every business likes to offer flexibility these days; whether it’s a multitude of phone tariffs to pick from, a burger served with or without gherkins, open-ended DVD rentals or laptops available in every colour of the rainbow. But one industry that’s not famous for bending to your needs is the personal loans market.

Indeed, traditional bank loans are generally very rigid in terms of how much you can apply for and how long you’ll be making repayments. Typically you’ll be offered four or five fixed amounts when looking to get an unsecured loan - such as £3,000, £5,000 or £10,000 - plus a small choice of loan lengths, say from one to ten years. But what if you only need a small sum of cash for a few days or weeks?

Payday loans have taken off in the UK in recent years and cater for people in need of a few hundred pounds, but they are not much more flexible than bank loans in many cases and the costs are high. Generally you can only pick from a few sizes of loan, in increments of £100 for example, plus you’ll need to repay on your payday, regardless of when you apply. The fees charged are also usually fixed, with a set fee per hundred borrowed.

Wonga is bucking the trend for loan products that suit the lender, by providing small, short term loans on your terms. The loan calculator on the home page allows you to select exactly how much cash you need and then control the cost by deciding how many days you want it for. The shorter the cash advance, the lower the interest and cost of repayment. As you move the sliders to determine loan amount and length, you’ll see the exact cost of repayment changing accordingly.

What’s more, this level of flexibility continues once you’ve been accepted and have received your cash. By logging in to the My Account section of the site you can repay a Wonga loan at any time and save money on the original cost calculated. That’s because you pay interest by the day and there are no catches or penalty fees for early repayment - something else the traditional loan industry is renowned for.

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.

World’s first iPhone loan application provides instant ‘street credit’

Wonga.com, an online provider of short-term cash advances, has launched the first ever credit app for the iPhone, allowing both existing customers and first-time applicants to access small, short-term loans from anywhere.

The London-based company, which provides ultra-flexible loans of between one and 31 days, says it will turn the touch-screen device into a virtual cash machine for urgent or unexpected expenses.

Errol Damelin, founder and CEO, said: “Our vision has always been to provide UK consumers with a fast, convenient and short-term way to solve immediate cash flow problems. While automating the lending process in a responsible way was a big challenge, our technology now enables us to develop a range of products which do just that.”

iPhone applicants can use their fingertip to move Wonga’s unique sliders, first choosing exactly how much cash they need (between £1 and £1,000), before determining the cost by deciding when to repay. The cost is always calculated up-front and they can then make a full application on the phone’s screen. Applicants receive an instant decision around the clock, with those who are approved guaranteed cash to their bank account within 15 minutes.

Wonga is the UK’s only lender to give applicant’s complete flexibility over the size and length of the loan required, with the cost determined by the number of days the money is taken for. Even early repayment is fee-free. The company’s web service was given its full market launch in July 2008 and has already processed nearly three-quarters of a million applications using a real-time risk and decisioning platform.

Damelin continued: “We have made this app available as a free download from the Apple Store and, although it’s just as easy and quick to use as our existing web service, our unique technology will ensure we continue to make responsible lending decisions.”

Payday loans have started to take off in the UK over the past year and the term payday loan, or payday advance is becoming a more familiar phrase, especially when searching for fast cash online.

A payday loan is a relatively small loan, usually of a few hundred pounds, which is taken until your next payday. You normally have to repay it with your next pay cheque, or over several paydays, regardless of when you apply. And you will normally be charged a pretty hefty fee per £100 borrowed - typically between £20 and £30.

It’s basically emergency cash and payday loans have their place. They are often cheaper than bank fees for unauthorised borrowing, for example, but Wonga provides a great alternative for urgent funds without a long-term commitment.

Compare the cost of a payday loan with a cash advance from Wonga.com

Wonga also provides short-term cash advances online, but in a much more flexible and speedy way. For starters, the entire process is online - no faxing, postage or call centres - and you can apply any time of day or night, 365 days a year. You will receive an instant answer on your screen and we even guarantee to send cash to approved applicants’ bank accounts within 60 minutes.

Our service is also much more flexible than a payday loan. Wonga allows you to choose exactly how much cash you want to borrow and the cost of our online loans is calculated for you, based on how many days you need it for. The shorter the loan, the lower the cost - it’s that simple.

Flexible cash advances from Wonga

You can see how our flexible pricing compares with a typical fixed fee for a payday loan over 30 days. In most cases a Wonga loan works out better value and you can even repay us early with no catches or fees to worry about.

Typical 2689% APR

(Find out why the APR is so big!)

As usual, it’s taken pressure from a regulator to make high street banks change their ways! As reported by the Times, the OFT has been calling for more transparency about charges, particularly for going over your bank overdraft limit. With a multitude of potential fees and some fixed charges running up to £20 per DAY, it’s about time they made it easier for people to work out the true cost of accessing emergency cash. Here’s an extract from the article…

Britain’s banks have today bowed to pressure from the Office of Fair Trading (OFT) and agreed to make their current account charges more transparent. They have also promised to make it easier for customers to switch from one bank to another.

Their decision follows publication of the OFT’s latest study into the £8 billion market, which highlighted three problem areas: lack of clarity over charges, difficulty in switching banks and concern over the way banks charged for unauthorised overdrafts. The OFT said the existing system did not work well for consumers.

To improve clarity over their charges banks have undertaken to provide an annual summary of the cost of their account for each customer. This is designed to help customers work out if they are getting value for money. Banks have also agreed to make charges prominent on monthly statements, provide average credit and debit balances, which will help consumers to assess the possible benefits of switching banks, and provide a range of illustrative overdraft charges for different scenarios.

Perhaps they should take a leaf out of Wonga’s book - we calculate the total cost to repay every time you apply for a loan online and there are no hidden catches to worry about. Indeed, our flexible loans are not only a simpler and crystal clear source of emergency cash, but often a lot cheaper too.

There’s only one of you, yet it’s relatively easy for a criminal to create a clone! At Wonga we take great care to protect your information securely when you apply for a short term loan, but you might be surprised by how few personal facts fraudsters need in order to commit ID theft and other fraud crimes.

And the most likely source of this basic info is YOU. They can even apply for a credit card with just your name, full address and date of birth. So take great care of your personal information and follow our simple tips…

• If anyone asks you for your personal details, ask yourself why they might need them and don’t be afraid to question or refuse
• Don’t write down passwords or PINs or, if it’s literally the only way you can remember them, be sure to keep them separate and very well hidden
• Invest in a decent shredder and make sure any letters or bills which aren’t being filed are totally destroyed before going in the bin
• Make sure your home laptop or PC is protected by a firewall and anti-virus software. There are plenty of free options so there’s no excuse for not protecting yourself online
• Never trust emails asking for personal details, even if they look like they’re from a service provider you use – if you’re really in doubt and think you might be ignoring something important, you can always phone

Concern from Which? over a new breed of UK bank account and the associated bank charges was recently discussed by the Beeb. It’s another example of the high street banks finding new ways to extract cash from customers after coming under massive pressure about unauthorised overdraft fees.

Naturally the likes of HBoS have denied any link and defend their new rates, which include a fixed £5 daily fee for an unauthorised bank overdraft. If you’re only stuck £50 or £100 into the red for a week or two the cost will really add up!

The simple fact is that banks make little or no money from people using traditional current accounts in a sensible way, so they rely heavily on hitting a minority with big overdraft charges, plus other fees, to make money. So now existing overdraft charges could be on their way out, is it really just a competitive market that’s prompting a new style of current account to emerge?

Which? certainly don’t think so.

Phil Jones, head of money research at consumer group Which?, said a new trend was developing while the OFT inquiry into the legality of bank charges rumbled on.

"Well it seems like a bit of a coincidence that while this court case is going on - and it looks like the banks are going to lose and have to repay consumers what they’ve unfairly charged them - that they are actually introducing a whole range of accounts with different charging structures."

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.

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.