"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.