Ferratum Is An Expensive SMS Lending Service

"Payday loans" -- emergency sums to tide you over if you're short while waiting for your salary -- are an expensive way to get money. New operator Ferratum offers a technology twist by incorporating the ability to apply for short-term loans via SMS messages, but the rates remain just as painful.

Because of credit checking, you can't apply for an initial loan on your phone, but once you've signed up, you can get further sums via your phone. But you'll pay dearly for the privilege.

A $200 loan with a seven-day repayment will incur a $42 charge, which is an effective interest rate of 21 per cent. Borrow $900 and pay it back 45 days later and the 'loan charges' are $378 -- an interest rate of 42 per cent. At that price, a cash advance on your credit card is much better value. The lesson? Don't take out a payday loan.


Comments

    Arent people sick of those HAPPY family images on websites like this? Really is the opposite of this.

    Can we get an edit/update that correctly references the interest rates in % per annum . Not just at flat % rates.

    Because the 42% mentioned in the article is actually 340% per annum. Changes the context of what you're saying dramatically.

    That first interest rate isn't 21%, it's 1009%. The second one isn't 42%, it's 285%
    That is one impressive loan sharking operation.

      I was calculating the simple rate, not the effective annual rate. Ugly either way!

    Something fishy about this mob, cannot contact them by phone at all, three number on website go straight to full message banks or are hung up as soon as it's answered. They approved me for a loan, claiming I had been sent a text and email (got neither), then wanted my pay dates to organise the pay-back, all before I had even got my hands on this money. Something not right when you can't speak to them?? Seriously comtemplating closing the account that they now have details for, I can just see them taking deductions out for a loan that I never got in the first place!! Shonky bastards.

    Why would you want to quote an annual interest rate for a loan you only have for 14 days? Thats like saying it costs $200,000 a year to stay in a 5 star hotel. It just doesn't make any sense I'm sorry.

      Because that is the way interest rates are displayed, per annum. If you get a personal loan at 12% interest and pay monthly you don't pay 12% of your initial borrowings in interest monthly you pay essentially 1% in interest in the first month. These loans should be illegal and are in many countries.

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