Amigo Loans has warned against a new breed of short-term, high-APR lenders appearing in the market.
It claims that these lenders, which are often billed as an alternative to payday loans, are offering ‘supersized payday loans’ which actually end up being more expensive, as customers borrow even greater amounts for longer periods.
It says its research reveals that these supersize payday loans top the list as the preferred alternative lending option for consumers, and a eight million Britons have already taken one out.
Sometimes marketed as ’12 month loans’, borrowers taking out a £500 with these products can end up repaying £949 at the end of term – almost double the amount initially borrowed, Amigo Loans claimed.
The loans firm believes people also appear confused about what so-called ‘one year loans’ actually are. 29% aren’t sure or don’t know of the difference between a ‘one year loan’ and a ‘payday loan’, and of the eight million Brits who have already taken out what they believe to be a ‘one year loan’, 13% admit they actually don’t know or aren’t sure of the difference, it claims.
James Benamor, founder and CEO of Amigo Loans, said: “The lending industry seems to go from one set of crooks to another, but actually these are big corporate organisations. Many of them are owned by the same companies behind payday loans with sky high APRs and hidden charges. ‘Pounds to Pocket’, for example, is owned by ‘CashEuroNetUK’ that also runs by ‘Quick Quid’, while recently launched ‘Satsuma’ is owned by ‘Provident Financial’. They are essentially trying to rebrand as something different to work around the system and skirt the new regulations.
“It’s a real worry that such a large number of consumers have taken out a supersize payday loan, and even more so when you consider the number who have committed to one without actually understanding what they are and how expensive they can be. More needs to be done urgently to educate people on these loans and the cheaper and healthier alternatives.”