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You can find the current article at its original source at http://www.guardian.co.uk/money/2012/dec/13/wonga-defends-extension-loans-christmas
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| Wonga tries longer loans | Wonga tries longer loans |
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| Payday lender Wonga has temporarily extended the period borrowers can take out its loans in a move that has sparked concern among debt advice charities | Payday lender Wonga has temporarily extended the period borrowers can take out its loans in a move that has sparked concern among debt advice charities |
| Wonga has previously made much of the fact its loans have a maximum period of 30 days, but for a week at the beginning of December borrowers could opt to take on a debt for 60 days. It is now offering a maximum loan period of 45 days. | Wonga has previously made much of the fact its loans have a maximum period of 30 days, but for a week at the beginning of December borrowers could opt to take on a debt for 60 days. It is now offering a maximum loan period of 45 days. |
| The spokesman said the 60-day loan period, which may have attracted borrowers who would otherwise have faced a repayment deadline right at the start of the new year, was "data driven" and not timed to coincide with the festive period. | The spokesman said the 60-day loan period, which may have attracted borrowers who would otherwise have faced a repayment deadline right at the start of the new year, was "data driven" and not timed to coincide with the festive period. |
| However, debt advisers said they were concerned the extension would tempt people struggling with the cost of Christmas. The insolvency group R3 recently released research suggesting 8% of people were considering using high cost short-term loans to fund festive spending. | However, debt advisers said they were concerned the extension would tempt people struggling with the cost of Christmas. The insolvency group R3 recently released research suggesting 8% of people were considering using high cost short-term loans to fund festive spending. |
| "It is interesting to note that Wonga has chosen to increase the length of the repayment term for a payday loan at a time when everyone's finances will be stretched already," R3 council member Louise Brittain said. | "It is interesting to note that Wonga has chosen to increase the length of the repayment term for a payday loan at a time when everyone's finances will be stretched already," R3 council member Louise Brittain said. |
| "Additional flexibility may seem attractive but comes at a price, as this will push up the overall cost of a high interest loan." | "Additional flexibility may seem attractive but comes at a price, as this will push up the overall cost of a high interest loan." |
| The chief executive of Citizens Advice, Gillian Guy, said: "We've seen problems relating to payday loans rise significantly over the past four years and we're worried this will only increase as more people feel the squeeze and payday lenders respond like Wonga by making loans appear more attractive." | The chief executive of Citizens Advice, Gillian Guy, said: "We've seen problems relating to payday loans rise significantly over the past four years and we're worried this will only increase as more people feel the squeeze and payday lenders respond like Wonga by making loans appear more attractive." |
| Frances Walker of the debt counselling charity StepChange said the fact the cost of borrowing money over 60 days was almost double the cost of doing so over 30 days meant this was "rollover by another name". | Frances Walker of the debt counselling charity StepChange said the fact the cost of borrowing money over 60 days was almost double the cost of doing so over 30 days meant this was "rollover by another name". |
| "The whole basis of these loans is short-term, and if someone needs a sum of money for two months there may be cheaper alternatives such as an authorised overdraft or a credit card." | "The whole basis of these loans is short-term, and if someone needs a sum of money for two months there may be cheaper alternatives such as an authorised overdraft or a credit card." |
| Wonga charges borrowers an upfront fee of £5.50 and then interest at 1% a day. Interest is not compounded, but quickly adds up if a longer repayment is chosen. Anyone who chose to borrow £200 for 60 days will face a repayment of £327 at the end of January 2013 compared with a cost of £266.31 to take the same loan over the usual 30-day period. Over 45 days a £200 debt adds up to £296. | Wonga charges borrowers an upfront fee of £5.50 and then interest at 1% a day. Interest is not compounded, but quickly adds up if a longer repayment is chosen. Anyone who chose to borrow £200 for 60 days will face a repayment of £327 at the end of January 2013 compared with a cost of £266.31 to take the same loan over the usual 30-day period. Over 45 days a £200 debt adds up to £296. |
| Wonga has previously argued that the 4,214% APR it is required to show on its website is misleading because its loans are only designed to be held for a matter of weeks, and when used in this way are cheaper than many other forms of borrowing. | Wonga has previously argued that the 4,214% APR it is required to show on its website is misleading because its loans are only designed to be held for a matter of weeks, and when used in this way are cheaper than many other forms of borrowing. |
| In May, the company's co-founder Errol Damelin said in an interview with the Telegraph: "The way that our personal loans product works is that it charges interest at 1% a day and it doesn't compound. You can't take it for more than 30 days and the average loan is for 14 days." | In May, the company's co-founder Errol Damelin said in an interview with the Telegraph: "The way that our personal loans product works is that it charges interest at 1% a day and it doesn't compound. You can't take it for more than 30 days and the average loan is for 14 days." |
| The lender's code of practice begins with background information saying: "We launched our first website in October 2007 and offer flexible loans of £1 to £1,000, for between one day and a month." | The lender's code of practice begins with background information saying: "We launched our first website in October 2007 and offer flexible loans of £1 to £1,000, for between one day and a month." |
| However, a spokesman for the company said the 30-day period was "typical", adding "we regularly offer a slightly longer loan duration to allow customers greater payment flexibility". | However, a spokesman for the company said the 30-day period was "typical", adding "we regularly offer a slightly longer loan duration to allow customers greater payment flexibility". |
| The spokesman said the trial of a 60-day loan period was a first and was "data driven". | The spokesman said the trial of a 60-day loan period was a first and was "data driven". |
| "We trialled a two-month maximum loan period for a week and believe our current product, where the vast majority of customers borrow for 30 days or less, currently meets Wonga customers' needs," he said. | "We trialled a two-month maximum loan period for a week and believe our current product, where the vast majority of customers borrow for 30 days or less, currently meets Wonga customers' needs," he said. |
| He would not disclose how long the 45-day loans would be available, but said extended loan periods had been a feature on the site over the past year. | He would not disclose how long the 45-day loans would be available, but said extended loan periods had been a feature on the site over the past year. |
| Other payday loan companies have been heavily criticised for attempting to cash-in on Christmas with adverts encouraging people to finance their festive spending with high cost credit. | Other payday loan companies have been heavily criticised for attempting to cash-in on Christmas with adverts encouraging people to finance their festive spending with high cost credit. |
| The homepage of Provident Financial's website tells consumers they can "spread the cost the Christmas" with one of its loans, which have an APR of up to 1,000%, while other lenders are offering borrowing on websites with names like Mistletoeloans and Mychristmasloans. | The homepage of Provident Financial's website tells consumers they can "spread the cost the Christmas" with one of its loans, which have an APR of up to 1,000%, while other lenders are offering borrowing on websites with names like Mistletoeloans and Mychristmasloans. |
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