Wonga have come under criticism for it’s high interest payday loans, as has the entire industry, for it’s lack of checks and due diligence prior to approving loans.
The company have responded to the critics by creating a 30 min movie called “12 Portraits” which follows 12 of it’s customers and documenting their experience.
In his defence of Wonga, Mr Wass said,
“The perception is that Wonga customers are poor and vulnerable but there are a silent majority of customers out there who are not”
The payday loan industry has come under attack from the Archbishop of Canterbury, MPs and even Newcastle United footballer Papiss Cisse.
Why Payday Loan Companies Are Successful
Companies such as Wonga have made a lot of money during the recession, with a huge drop in loan and overdraft approvals from banks and building societies.
While approvals have fallen, the demand to borrow money has grown during the same period, creating almost a perfect financial storm.
In my experience at Debt Support Trust no one borrows from a payday loan company unless they have no other choice and needs the money.
While some people may borrow money and repay it within the agreed period of time, those who don’t, end up paying a lot of money very quickly.
Financial regulators will struggle to stop payday loan companies because there’s a demand for this service and it’s up to the company to decide what checks it wants to carry out.
Alternative to Payday Loans
Banks & Building Society: As long it’s possible to borrow from a bank of building society this is the best alternative to borrowing money. You’ll pay less interest, have longer to repay and are usually better at resolving debt problems if you fail to make payments.
Credit Union: With much lower interest rates, a credit union is a far better option than payday loan companies and are generally good at resolving failed payments.
Friends & Family: While not everyone is lucky enough to be able to borrow from friend and family it will be the cheapest option. Most people won’t charge interest or charges when lending money to their friend.
Debt Solution: If you are borrowing money to repay a debt and cannot get funds from any other source, you should consider getting debt advice. Borrowing from a payday loan company to repay debt will just make the situation worse and continue the spiralling financial problems.
Payday loan companies have a right to exist, especially while they are in such high demand but that can change once people know there are other options.
A lot of people i speak to have borrowed money from companies such as Wonga despite having other options available to them, such as debt advice.