Payday loan 'carries 994% APR'
27 November 2009 16:38:27
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| Short-term credit carries higher rates than personal loans. |
TxtLoan offers short-term credit via phone applications and has attracted around 15,000 customers since being launched in April 2009, the Guardian reported.
A total of £110 must be paid back by those who borrow a seven-day TxtLoan of £100.
This represents an APR of 994%.
By way of contrast, many mainstream providers offer personal loans of a much higher value and single digit APRs.
Figures from the Guardian suggest that costs can spiral quickly if the TxtLoan credit is not paid back on time.
By day 23, the amount owed by the customer rises to £200 due to late payment charges.
Speaking to the newspaper, a TxtLoan representative pointed out that the loans were best suited to customers who face sudden emergency cash crises.
"The nature of the service makes it a viable alternative to incurring unauthorised overdraft charges," the spokesman said.
TxtLoan's website also clearly sets out its various fees and penalty charges.
The firm also subjects applicants to credit checks and does not lend to those who have been declared bankrupt or were visited by a debt collector in the past 18 months.
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