Medium term loans - Do they exist ?

[a4nthony]

Hi All,

Not that I'm looking to borrow but as a business idea, is there such a thing as a medium term loan ?

I.e. Pay day loans are aimed at very short term, although I know they do extend them and Bank loans are normally aimed at 2 - 5 years.

P2p loans are (I believe) aimed at long term 2 - 5 years but for people who can't normally borrow from Banks but don't want pay day loans.

Do you think there is a gap for 6 - 12 month loans at interest rates between say p2p (18/20%) and payday (several hundred %, ignoring representative figures). ?

So say someone wanted to borrow £1k over 12 months at 50/60%, or is this unreasonable or does it already exist ?

Thoughts please ?

 

[Merchant UK]

I don't think so, I tried to borrow £1000 for 2 weeks from barclays they told me to apply for a loan over 5 years, i told them i wanted it only for 2 weeks, they wouldn't do it, even for an over draught they expected me to have it for a year.

I told them i just needed the cash to ensure my payments were ok for a couple of weeks whilst i waited to get paid from a large contract, You'd think they would be pleased far from it, they made me spend hours on the phone moving me between people, in the end i told them to stick it.

Absolutely disgusted with the banks nowdays and i try and avoid them the best i can, Just use them for cashing cheques, the minute its cleared out it all comes

 

[tony84]

You can get 12 month loans.

Also on a side note, If you borrow £100 for 30 days from wonga, you have to pay back £136.72 - to me that means its 36.72% interest? But because all borrowing is calculated using the APR it makes the rate a lot higher for shorter term loans.

If you borrow say £50 off your mate and then bought him a pint to say thanks, it probably works out at a similar rate.

 

[a4nthony]

I don't think so, I tried to borrow £1000 for 2 weeks from barclays they told me to apply for a loan over 5 years, i told them i wanted it only for 2 weeks, they wouldn't do it, even for an over draught they expected me to have it for a year.

I told them i just needed the cash to ensure my payments were ok for a couple of weeks whilst i waited to get paid from a large contract, You'd think they would be pleased far from it, they made me spend hours on the phone moving me between people, in the end i told them to stick it.

Absolutely disgusted with the banks nowdays and i try and avoid them the best i can, Just use them for cashing cheques, the minute its cleared out it all comes

I know it seems crazy. But if it was available, what would you be willing to pay ?

 

[a4nthony]

You can get 12 month loans.

Also on a side note, If you borrow £100 for 30 days from wonga, you have to pay back £136.72 - to me that means its 36.72% interest? But because all borrowing is calculated using the APR it makes the rate a lot higher for shorter term loans.

If you borrow say £50 off your mate and then bought him a pint to say thanks, it probably works out at a similar rate.

I agree, I think payday rates are misunderstood but thats another story.

What would be a viable rate for all parties, bearing in mind I am probably aiming this at people who are a slightly higher risk.

 

[Merchant UK]

I know it seems crazy. But if it was available, what would you be willing to pay ?

I'd be happy to pay a decent rate for what it was worth, i think in that particular week i worked a massive amount of overtime and grossed over £1500 for that weeks work, so that helped me out alot, but even with being self employed i couldn't work like that all the time.

 

[a4nthony]

I'd be happy to pay a decent rate for what it was worth, i think in that particular week i worked a massive amount of overtime and grossed over £1500 for that weeks work, so that helped me out alot, but even with being self employed i couldn't work like that all the time.

Would 50-100% APR be unreasonable (bear in mind, this is aimed at people with average credit ratings) ?

So for example, Mr Bloggs wants to borrow £1k to buy some furniture for 12 months and pays back £60 per month ?

 

[tony84]

No idea what rates they would be to be honest. I suppose it depends on whether your going after secured or unsecured lending.

EDIT: This might help - http://www.poundstopocket.co.uk/adw-longtermloans.html

With adverse credit, you might struggle though.

 

[MASSEY]

*edit - mis-read op

Wonga do business loans now.

 

[a4nthony]

No idea what rates they would be to be honest. I suppose it depends on whether your going after secured or unsecured lending.

EDIT: This might help - http://www.poundstopocket.co.uk/adw-longtermloans.html

With adverse credit, you might struggle though.

Thanks. I believe, but not certain, poundstopockets are owned by Wonga or one of the other big ones and still charge almost 300%.

 

[a4nthony]

*edit - mis-read op

Wonga do business loans now.

Yes I know, but was still thinking of consumer lending.

 

[DavidAshdown]

Is this something you are thinking of setting up as a business ?

 

[arcon5]

PoundstoPocket do 12 month loans, their rates are here: http://www.poundstopocket.co.uk/fee-schedule.html

What people would pay depends on who you are targeting.... typically a home owner with a fair income wouldn't be happy paying £800 on top of a £1k loan for 1 year.... where as somebody desperate to get their car fixed to get to work may be prepared to do so.

If I was looking for a 6-12 month loan, if I considered your fees excessive, i'd be looking for terms that allow overpayments & interest recalculated downwards when an overpayment is made.

 

[TheEngineer]

If you credit rating is good you could borrow from Zopa (no connection).

No early repayment fees so you could take out a 1 year loan and pay it back early.

 

[a4nthony]

PoundstoPocket do 12 month loans, their rates are here: http://www.poundstopocket.co.uk/fee-schedule.html

What people would pay depends on who you are targeting.... typically a home owner with a fair income wouldn't be happy paying £800 on top of a £1k loan for 1 year.... where as somebody desperate to get their car fixed to get to work may be prepared to do so.

If I was looking for a 6-12 month loan, if I considered your fees excessive, i'd be looking for terms that allow overpayments & interest recalculated downwards when an overpayment is made.

I was thinking of people who would typically fall into a payday loan category but are not actually desperate for cash, i.e. not got a broken down car, but looking at maybe buying some furniture but could do with spreading the payments, a bit like when you buy a sofa.

 

[a4nthony]

If you credit rating is good you could borrow from Zopa (no connection).

No early repayment fees so you could take out a 1 year loan and pay it back early.

But what if your credit rating wasn't good enough for Zopa ?

 

[a4nthony]

Is this something you are thinking of setting up as a business ?

Yes, I think there is a gap in the market above payday loans. Something that is nowhere near as expensive, not as controversial and yet still offers a good return for lenders and is affordable to borrowers, so that the default rates are not high.

I think if you do not have a perfect credit rating, then anything other than a getting a payday loan is still quite difficult but I'm still researching which is why I was interested in peoples views.

 

[businessfunding]

Not really sure what the emphasis of the question is here

However broadly speaking, there is a market for 6 - 18 month loans.though the rates would need to be on the high side how high would depend on whether you were targeting prime, non-prime or sub-prime cstiomers

 

[MASSEY]

I think you're missing the point. The reason payday loans are so high in APR is because of their short term nature and the risk involved in lending.

You are clearly talking about loans for people who have adverse credit, they are never going to get more favorable terms.

Whether they are desperate for the cash or not is neither here or there really.

But using your example of furniture, i knew someone with shocking credit but they were still able to get sofas on finance from one of the large furniture stores.

Anyway, provident financial offer what i think you are describing ;-)

 

[DavidAshdown]

Not really sure what the emphasis of the question is here

However broadly speaking, there is a market for 6 - 18 month loans.though the rates would need to be on the high side how high would depend on whether you were targeting prime, non-prime or sub-prime cstiomers

So what your looking at is the £300 - £1500 market for grades C - E market with 50 -100% rates, is that right ?

 

[DavidAshdown]

Yes, I think there is a gap in the market above payday loans. Something that is nowhere near as expensive, not as controversial and yet still offers a good return for lenders and is affordable to borrowers, so that the default rates are not high.

I think if you do not have a perfect credit rating, then anything other than a getting a payday loan is still quite difficult but I'm still researching which is why I was interested in peoples views.

So what your looking at is the £300 - £1500 market for grades C - E market with 50 -100% rates, is that right ?

 

[a4nthony]

I think you're missing the point. The reason payday loans are so high in APR is because of their short term nature and the risk involved in lending.

You are clearly talking about loans for people who have adverse credit, they are never going to get more favorable terms.

Whether they are desperate for the cash or not is neither here or there really.

But using your example of furniture, i knew someone with shocking credit but they were still able to get sofas on finance from one of the large furniture stores.

Anyway, provident financial offer what i think you are describing ;-)

Well im not that convinced.

I think the reason the payday loans are so high is because they've got a captive audience. Yes the risk is high but have you seen how much money Wonga are making? Its staggering. In principle they could slash their rates 10 fold and still make a handsome profit even with the high risk and the bad debt provision.

In other words, I think they are taking advantage of the situation and because of their rates people who are not desperate, avoid them.

But there are still people who want to borrow but don't have perfect credit ratings but could be perfectly adequate payers.

With regard the sofa's, these are the same as payday loan companies in so much as they exploit the borrower but in a disguised way.

a) They sell you a £300 sofa for £1,000 (or more) and
b) You can get credit for it, as long as you buy 'their' sofa

 

[PDRD]

Would 50-100% APR be unreasonable (bear in mind, this is aimed at people with average credit ratings) ?

So for example, Mr Bloggs wants to borrow £1k to buy some furniture for 12 months and pays back £60 per month ?

Yes please I will take every penny you have on these rates borrow 1000 pay back 12×60

 

[a4nthony]

I've just checked provident's website and it only lends £300 - £500 but at 272% - 545% interest.

Ironically, there is a video on their corporate site with an interview with their CEO, Mr Peter CROOK !! lol

 

[a4nthony]

Yes please I will take every penny you have on these rates borrow 1000 pay back 12×60

Lol, sorry, yes I meant to put £60 'interest'.

 

[MASSEY]

I've just checked provident's website and it only lends £300 - £500 but at 272% - 545% interest.

Ironically, there is a video on their corporate site with an interview with their CEO, Mr Peter CROOK !! lol

500 pound loan over 23 weeks repay 747.

That's a reasonable 50% for someone with adverse credit, surely?

Would you like to see them pay 600 back for 500 over 23 weeks?

Have you looked at 'credit unions'? They are 'not for profit' and charge low APR's. Well we say low but in comparison to banks they are still high.

 

[a4nthony]

500 pound loan over 23 weeks repay 747.

That's a reasonable 50% for someone with adverse credit, surely?

Would you like to see them pay 600 back for 500 over 23 weeks?

Have you looked at 'credit unions'? They are 'not for profit' and charge low APR's. Well we say low but in comparison to banks they are still high.

Provident is £500 over 23 weeks pay back £910

I'm suggesting £1000 over 52 weeks, pay back £1720

Are credit unions easy to borrow from ?

 

[businessfunding]

Just to throw in my final 2 penorth

To understand lending and interest rates there are only 2 things you need to know about

1. Collections
2. Bad debt

Master these and all else will follow; ignore them and you will fail very quickly

 

[a4nthony]

Just to throw in my final 2 penorth

To understand lending and interest rates there are only 2 things you need to know about

1. Collections
2. Bad debt

Master these and all else will follow; ignore them and you will fail very quickly

I agree.

However, I'm probably not going to be the one to launch this business but I'd really like to know if there is a market for it.

If all the factors were taken into account, is it a viable business ?

 

[DavidAshdown]

I'm not sure, can you expand? Why would someone want to borrow in that situation ?

 

[a4nthony]

I think maybe I should start a new thread, to explain what I'm anging at.

 

[businessfunding]

I think maybe I should start a new thread, to explain what I'm anging at.

In a nutshell, there is a buyer market - there always will be.

If you aren't doing it, what are you hoping to achieve?

 

[a4nthony]

In a nutshell, there is a buyer market - there always will be.

If you aren't doing it, what are you hoping to achieve?

Well I don't have the technology to do it but I know someone who has, so I'm trying to do some market research and then put forward a business plan and take it to them as a proposition.

 

[businessfunding]

Do they have the cash to do it?

I take it this is an online business you are looking at? (Otherwise technology required is minimal)

 

[a4nthony]

Do they have the cash to do it?

I take it this is an online business you are looking at? (Otherwise technology required is minimal)

Yes, partially online.

 

[alice_p]

If you are looking at business loans, or loans in general, you may always be faced with repaying money back with interest, this will vary on the amount you have requested and the time you wish to repay the funds. Just need to keep doing some research to find the most effective loan supplier for your situation. Just make sure that if you do get a loan, you will be able to repay it and you will have the money!

 

[a4nthony]

If you are looking at business loans, or loans in general, you may always be faced with repaying money back with interest, this will vary on the amount you have requested and the time you wish to repay the funds. Just need to keep doing some research to find the most effective loan supplier for your situation. Just make sure that if you do get a loan, you will be able to repay it and you will have the money!

Thanks but I'm not actually looking for a loan !

Looking at setting up a loan business and looking at different angles as opposed to what is already out there.