I recently found an article on zdnet which seemed to have been instigated by an article on the Daily Mail website.
The Daily Mail article suggested that Wonga a “‘legal loan shark’ [were] offering cash at an astonishing 4,214 per cent annual rate of interest. … as an alternative to Government-backed student loans”
I have a number of issues with both the zdnet and the Daily Mail articles, firstly I can’t believe zdnet are taking their news or inspiration for articles from the Daily Mail, but more importantly I can’t believe they stoop to such band wagon jumping and emotive tripe as “…convincing language, bright colours, and a friendly interface online can persuade people to agree to things against their better judgement” like people are going to take out loans because of a nice colour scheme, who, who takes out a loan because they like a website? People take out a loan because they need money. And people take out a payday loan because they need money quickly.
But the main issues are with the Daily Mail article in the first place. This article waves its hands in the air about the ‘astonishing 4,214 per cent annual rate of interest charged on the loans’, even though it also explains that the interest charged on the loan is actually 30% and APR is only expressed due to legal obligation to do so, not because it is a useful or relevant metric. Why decry the loans because of their APR and in the same article explain APR is irrelevant?
“Offering [payday loans] as an alternative to Government-backed student loans” in truth I don’t think anyone would suggest a payday loan as an alternative to student loans, but they can work as complementary. Payday loans are intended for emergency money, when other money is unavailable or could not be obtained in the time needed; when student loans are slow or late coming through for instance, or have run out before the end of term.
They went on to say “..the payday loan company is ‘moving in for the kill’ following the Coalition’s shake-up of higher education which will see fees rise to as high as £9,000 a year in the autumn.”
What has the fees rising to £9000 got to do with anything? Students don’t have to pay this, ever! The £9000 figure is what universities can charge the government per student. The students then pay back a percentage of their earnings to the government when they are earning over a prescribed threshold. What they, the students, pay back is unrelated to the fees the university charges per student per subject, what they pay back is only related to what they are earning. Education fees have no relevance to students and certainly don’t have any relevance to students’ day to day expenses.