Innumerate Archbishops

[drplokta]

Heard the new Archbishop of Canterbury (soon to be our local vicar, pretty much) on Radio 4 at lunchtime saying that credit unions should be able to compete with Wonga while offering APRs of 70% or 80%, rather than Wonga's 5,500%. However, a quick calculation shows that if you're doing two week loans with a 7.5% default rate (which I believe is pretty much Wonga's averages), you need to charge an APR of 556% merely in order to cover your defaults, without taking into account administrative overheads or the actual cost of the capital.

Comments

[anef.livejournal.com]

Still a big difference between 556% and 5,500%. I think pawnbrokers charge more like 1,000% APR, which strikes me as less exploitative, though obviously it's secured so the risks are much lower.