Lender offers 277% loans – what are the alternatives
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The lender is called Pounds to Pocket and it’s offering loans with a representative APR of 278%. That’s horrendously high.
You might assume that Pounds to Pocket is just another payday loan company like Wonga.com or QuickQuid, but actually it’s a bit different.
Firstly, Pounds to Pocket is significantly cheaper than the payday loans companies. And secondly, Pounds to Pocket is willing to lend for up to a year whereas payday loans are normally for a month.
What’s more, borrowing from Pounds to Pocket has some other plus points. You can apply for the loan online and get a yes/no answer within ten minutes. You can repay the loan early and not be hit by any penalties. And most importantly, Pounds to Pocket is willing to lend to people who don’t have a good credit rating.
Now that we’ve discussed the plus points, let’s take a look at why we think you should avoid this loan if at all possible
Take a look at this table:
Source: Pounds to Pocket
So if you borrow £1,000 for a year, you’ll end up paying £868.66 in interest. Some borrowers may even be offered loans at more expensive rates.
Paying so much interest makes very little sense, so what are the alternatives?
A conventional personal loan
Currently Marks Spencer offers the market-leading personal loan and charges just 6% APR. However, you need to borrow at least £7,500 to get such a low rate.
If you borrow £1,000 for a year, Marks Spencer will charge 19.9%. Sainsbury’s are offering a slightly lower rate -you’d pay 18.8% if you took out a Sainsbury’s Nectar Cardholder Loan.
Obviously these rates are much cheaper than Pounds to Pocket, but you’ll need a reasonably good credit rating to get one of these loans. You probably won’t need a spotless record though.
Credit cards
If you have a strong enough credit rating, 0% credit cards are the best way to go. If your existing debt is on a credit card, just move it over to a 0% balance transfer card, and you won’t have to pay any interest on the debt for up to 23 months.
If you have a poor credit rating, chances are you may not qualify for the top deals. There are cards aimed specifically at such people and, while the APRs are pretty high, (around 39.9%) they’re still far lower than Pounds to Pocket.
The catch of course is that you won’t have access to the line of credit immediately as you obviously have to go through the application process.
Authorised overdraft
You may be able to persuade your bank to give you an authorised overdraft on your bank account. Costs vary but the average rate across the market is somewhere around the 20% mark. Your bank may be more sympathetic than you expect.
Borrow from friends or family
If you’re really desperate for cash, consider asking your friends or family for some financial help. This only makes sense if your friend or family member can afford to lend to you – and make sure you can pay back the loan on time!
Review your finances
If your credit rating is poor and you don’t want to borrow from your family, it’s possible that none of the above alternatives will work for you. If you want to borrow for a holiday or something else that isn’t essential, we’d recommend you don’t borrow at all.
But if it’s absolutely imperative that you get money fast for an emergency, then Pounds to Pocket is an option. At least it’s cheaper than a payday loan, and you can pay off the loan early without being hit by a penalty.
That said, if circumstances force you to borrow from Pounds to Pocket, there’s probably something wrong with your finances, and you should review your situation.
We’d urge you to speak to someone at one of the free debt advice charities such as National Debtline, the Consumer Credit Counselling Service or Citizens Advice. They can help you reduce your spending and negotiate with your creditors. As a result, your monthly payments may be reduced and you might also be offered a freeze on interest payments.
It’s also worth making a big effort to budget more effectively. Check out MSN’s Money Track tool which makes it easier to spot areas where you can cut back.
Our verdict is simple: Pounds to Pocket is charging way too high a rate for a loan. Steer clear unless you are in the direst of emergencies.
- Compare personal loans
- Compare poor credit history credit cards
- Compare 0% new purchase cards
- Compare balance trasfer cards
Article source: http://money.uk.msn.com/cards-and-loans/lender-offers-277percent-loans-%E2%80%93-what-are-the-alternatives
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