Would you pay 2.6 million percent APR?
January 2, 2008
A woman that borrowed a small amount of money for a short period of time has been charged an astounding 2.6 million percent APR by a lender. The woman from York took out the small £320 loan for the period of one week from loan company Early Pay Day Loans, and was charged an astonishing 2.6 million percent APR with interest of £80 being added to what she owed just for borrowing the money for seven days. According to reports the APR when worked out over the twelve month period came to 2,639,385.9%.
The loan firm in question has come under fire since its APR was revealed, but an official from the company stated that the rates charged were competitive. The woman who took out the loan remains unnamed at her request, but approached officials at York Credit Union for advice on her debts, which included the debt that she had with Early Pay Day Loans. This is when the interest rate came to light.
The manager of York Credit Union 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.”
However, he did add that he understood why some people in difficult circumstances would take out such loans.
He also issued a warning for other borrowers, stating: “Don’t enter into this kind of loan agreement without fully understanding the consequences in the short and long term.”
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.”
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