In fact, borrowing money using our service could often work out cheaper than using a bank overdraft* so really, citing APRs and comparing them is a bit like comparing apples and oranges
London, UK (PRWEB) February 19, 2010
In a statement issued today, loans industry expert Gary Miller-Cheevers (and CEO of payday loan company Speed-e-loans.com) has endorsed the Better Banking Campaign - even though his industry sector is one of the areas that has come under fire from the Campaign.
The Better Banking Campaign - a body of charities and local groups - says that up to seven million people cannot access bank-supplied overdrafts, loans and credit cards which then forces them to seek alternative credit elsewhere - such as via payday loan lenders and home credit companies.
This, says the Campaign, sees people being charged high interest on some loans, sometimes up to 2,500% a year.
Commenting on this Mr. Miller-Cheevers said: "Speed-e-loans definitely supports the Better Banking Campaign. However, the 'bad-mouthing' of the payday loans industry and its APR (Annual Percentage Rate) charges should be put in to context.
"The APR or EAR (Equivalent Annual Rate) is how the Office of Fair Trading has deemed that the cost of financial products must be calculated so that consumers can make a choice, on a level playing field. The problem is that it is not a level playing field, in fact it is a very uneven playing field.
"For most people, an annual calculation of interest, like APR, doesn't really deliver a meaningful way of illustrating the cost of a payday loan that could be for as little as 7 days.
"In fact, borrowing money using our service could often work out cheaper than using a bank overdraft* so really, citing APRs and comparing them is a bit like comparing apples and oranges".
He points out that the Speed-eloans service vets its customers very carefully, declining over 90% of all applicants. "Speed-e-loans is not here to pile misery on heavily indebted individuals. Our target market is employed individuals who want a relatively small, fast cash advance ahead of the next payday. We verify employment, and run our own 1,000 point high speed credit and ID check on every applicant that meets our basic criteria, before electronically depositing the cash in our customer's bank within 2 hours".
*Example of how APRS can be misleading
With the Speed-e-loans payday loans service a charge equivalent to around 1% per day plus a one-off funding fee of £4.95 is typically made for a loan that is meant to be repaid in less than 30 days.
As an example, a loan to pay an urgent mobile bill of £100 for 20 days (until next payday) would cost £25.94 in fees and charges. For this Speed-e-loans have to quote an APR of 2686% according to the 'rules'.
Now take the same customer who needs £100 to pay an urgent mobile bill and goes overdrawn. If that overdraft is unauthorised, Halifax will charge £5 per day for up to 20 days, thus £100!
This is nearly four times the charges of the Speed-e-loans payday loans service, and yet the Halifax APR is quoted at 0%. This is explained on their website that as they charge fees and not interest, their EAR is 0%.
Overall, Speed-e-loans.com charges £25.94 and Halifax charges £100. Yet the Halifax are the ones showing a 0% EAR.
For more comparisons, please click here: http://www.speed-e-loans.com/high-street-banks.html