Thursday, July 28, 2011

Fair Finance for those on benefits? "Typical APR 52.94%"

"Employed or receiving Benefits - Isn't it about time you got a fair deal". The other weekend I received this "flyer" through my letter box.  Double click on the scans left and right to bring up details.

At first I thought that this was just another form of Moneyshop or Payday 1330% APR con job targeting the poor and vulnerable.

I then had a proper look at the leaflet and saw that a typical APR of 52%.   Is this a "fair" interest rate.  Especially if you existed on benefits or low wages? 

Fair Finance is a Social enterprise which has some pretty respectable partners and backers. Their aim is to put "loan sharks and predatory lenders" out of business. Which is very laudable. 

Of course 52% is far, far less than the legal loan extortionists charge never mind the illegal loan sharks.  Yet I see that a local credit union offers similar (I admit that a credit union has a different set up) loans at only 19.6% APR.  Under Fair Finance you would pay £624 back on a £500 loan over 12 months while the credit union will only charge £567?  A big difference if you are on benefits or low pay? Should we not be backing credit unions?
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