Woman charged APR of 2.6 million percent
January 5, 2008
A woman from York recently took out a short term loan, on which she was asked to pay an astounding APR of 2.6 million. The woman, who asked to remain anonymous, took out a small loan of £320 for a period of just seven days in the run up to Christmas. She took the loan through Early pay Day Loans, and when she was due to repay just seven days later a whopping £80 charge had been added to the amount borrowed.
The matter came to light after the woman sought advice in relation to her debts, including the short term debt, from York Credit Union. It was here that one of the officials from the credit union realised just what sort of APR the woman had been charged on the loan. Although the pay day loan company has been blasted for charging this APR, officials from the firm have insisted that the charges are fair and competitive.
An official from York Credit Union said it was understandable why some people felt that they had to take out this type of loan, but he also stated: “I’ve never seen an APR that high. When we put her details into the computer, our software - which is designed to help credit unions analyse borrowers’ details - simply could not cope with the figure and wouldn’t process it. The computer assumed it was a mistake.”
An official from Early Pay Day Loans stated: “The charges on our loans are competitive in the market, and we like to think we are responsible lenders.” However, the official from York Credit Union added: “Don’t enter into this kind of loan agreement without fully understanding the consequences in the short and long term.”
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