Extortionate rates charged on some unsecured loans - Loans - News - Moneyfacts

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Extortionate rates charged on some unsecured loans

Extortionate rates charged on some unsecured loans

Category: Loans

Updated: 12/01/2009
First Published: 09/01/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Some borrowers are paying as much as 10,000 per cent interest on unsecured loans, it has emerged.

A Conservative Party report has revealed that payday loans - usually taken to provide a short-term finance option - are charging "extortionate" rates.

Shadow housing minister Grant Shapps explained that consumers are borrowing £200 but repaying £300 within a couple of weeks, which equates to an annual percentage rate of 1576.5 per cent.

And with some deals reaching five-figure interest rates, he described the practice as "obscene … particularly when the evidence suggests that these loans are targeted at some of the most vulnerable members of our society".

The Tories pledged to tackle the problem by creating a free National Finance Advice service, as well as encouraging the greater use of credit unions.

Last week the Bank of England revealed that debt due to unsecured loans and credit cards is continuing to rise, although the rate of growth was found to be slowing.

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