19 December 2006
High APR loans offered by credit lenders are not as dangerous as their reputation has led people to believe, according to national money education charity Credit Action (CA).
Associate director of CA, Chris Tapp, said that the face-to-face approach to lending that high APR lenders adopt is welcomed by many customers and that the flexibility of the loans made them a credible option for some consumers.
His comments arrive on the back of the news that credit providers are using the festive period to encourage consumers to take out loans which have astronomical rates of interest.
Provident Financial, one of lenders to get involved, has sent junk mail to households offering loans with a typical rate of 117% as well as rates of up to 300% for other borrowers.
Mr Tapp claimed that there was a lot of misunderstandings surrounding the credit lending industry and that as long as consumers were sensible, high-interest loans could be workable for short periods of time.
"The problem is that APR is an annual rate and because organisations like Provident and other doorstep lenders lend small amounts of money over a short period of time, calculating interest for a year doesn't really help," he said.
"The Competition Commission, which has recently completed a two-year inquiry into the home credit market and found that it would be much better to talk about the total cost of credit rather than APR."
"It's worth noting that companies like Provident Financial have the highest customer satisfaction of any financial services company in the UK; the people who they serve love the service they provide, because it's door-to-door and they know the person they are dealing with," Mr Tapp added.
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