This is the deal with Wonga. They are a pay day lender. That makes PAY DAY a key word. They are a service to get you through a few days of desperation, at a premium price.
I just heard on the news of a lady who borrowed £275 to buy a new cooker, and ended with £10,000 of debt. Clearly she didn’t understand how Wonga works.
These are the figures: Borrowing £275 + Interest & fees £44.77 = Total to repay £319.77
(see picture for more details)
If you treat Wonga like an ordinary loan then yes, you will get into trouble.
I recently read Planet Ponzi, a fantastic book by Mitch Feierstein about how the financial markets got as they are. His top advice for anyone buying into financial markets is only to invest in things that you fully understand the mechanics of. When you are buying a cooker on a loan, it’s easy to think that that might not apply to you as a consumer. But it does in every way. The cooker is what you invest in. The dividends of the investment are being able to feed your family in the latent time before your next pay check. If you don’t understand that this is an extremely short term loan, then you are foolish to invest in it.
Now to the Church of England. If the social problem at hand is down to borrowing, why is the church teaching people that the solution is borrowing at a more affordable rate, and then providing the service? Loans are meant to be for absolutely desperate situations. If you cant afford items you desperately need, get a sensible long term loan with low interest rates. If you only need to wait till next Friday, live with it.
The solution is education. Teach people how financial systems work. Teach people to be self reliant. Teach them to save for a rainy day. Teach them to constantly strive to improve and earn more. Teach them that credit is for exceptional circumstances, like a house or education.