These are genuine legal loans and should not be mistaken for dodgy deals provided by loan sharks.

Whilst the interest rates on these loans look scary, you need to be aware that these firms are not breaking the law and in many instances are proving to be lifesavers.

What people fail to realise is that when the pay day loan companies quote 2500% APR, you are not paying back 100’s times the amount borrowed. I was with a pretty savvy guy this morning who stated that most people do not understand APR’s and he’s right.

“If you said 250% APR or 2500% APR to a borrower and asked them to estimate the total amount repayable when they borrowed £100.00? they wouldnt have a clue.”

If the individual concerned would not be able to calculate a payment then that says to me the APR is a pointless figure. I would suggest that APR’s are missleading.

Example from the ”Premier League” 4-0 Winning side Blackpool Town’s new shirt sponsor “Wonga” a pay day loan company.

• Borrow £100 over 10 days.
• Repay £115.91 in total.

Now in simple maths, the above calculation says to me it costs 15.91% over 10 days to borrow that money – Simples as comparemyauntiescats says.

However the APR is an average 2689% ?

This high APR figure makes no sense whatsoever, so all I can suggest for this type of product is that you do your own maths and if you can afford to repay the loan back and you desperately need this short term cash, then just be very careful and make sure the firm concerned has a consumer credit license.

If you are unsure you can check the pay day loan company holds a license with the OFT – Check here   http://www2.crw.gov.uk/pr/Default.aspx

I’m sorry to say that the current regulatory framework needs some work regarding APR’s etc, and until they get it right, which over time I am sure they will, please just be extra careful.

At Trumpo we dont refer pay day loan clients or allow pay day loan companies to advertise on our site at the moment. We have however have been approached by a number of firms and are carrying out due dilligence on them to see if they can be a trusted partner.

The Telegraph reported this morning that 1.2 million took out these loans in 2009 with an average loan size of £294. 

This is a £ Billion + industry and growing which is absolutely staggering.

We will carry out further research and come back to you all soon.

Your Trumpo.

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