Loans and interest payable to large electrical store

[pinkyBear]

I was in town the other day rerturning a faulty camera I had purchased from a large electrical retailler.
As I was waiting for the shop steward to deal with my query, there was a loan application beside the till. I noted the interest rate was 29.9% - I nearly fainted. I also noted the occupation of the applicatant - a machine operator.
I know I am going to be accused of being nosey here - an accusation I do not deny!! But i couldn't help but feeling for this person, they are probably in a lower paid job and when they make a purchase they pay a higher rate of interest than a regular loan...There is alot of noise about lending to people with poor credit ratings and the trouble a young person can get into when they take out these loans.. But very little is said about smaller loans like the above, where the applicant is paying way over the odds for a device.

My "Monday"/Tuesday rant over...

 

[Buddyboy]

Re: Loans and intrest payable to large electrical store

This is a rant close to my heart as well (as my wife will testify ).

Whenever I see the ads in the paper for Dixons, Currys, etc. (including the ESB) and I see the APR after the "interest free 6mnts" I blow a gasket. Typically around 29.9%.

I mean, if someone hasn't saved for the sofa already, what makes them think they will have it paid off during the interest free period, and won't be hit with the following 2.5 years payments?

And what's wrong with going to the bank/credit union etc. to get the loan at reasonable rates? Even paying by credit card and paying it off over the same period is cheaper! And if the answer is that they cannot get approval for a loan from these places, well... maybe that should tell them something.

It makes me wonder how much people should be protected from themselves.

Sorry to hijack your rant...and you said that this is for smaller items... hell, you can buy a €4000 suite in some shops at these rates.


Deep breaths, deep breaths.

 

[demoivre]

Re: Loans and intrest payable to large electrical store

This type of loan often comes with an interest free option though. Maybe you should have been even nosier and read the whole agreement to find out .

 

[Buddyboy]

Re: Loans and intrest payable to large electrical store

Yea, they have an interest free period of 6 months, after which you either pay the balance (which is normally the purchase price less the 6/36ths you have paid) or else you are automatically into paying the balance over the remaining 30 mnths at the 29.9%.

 

[demoivre]

Re: Loans and intrest payable to large electrical store

Yea, they have an interest free period of 6 months, after which you either pay the balance (which is normally the purchase price less the 6/36ths you have paid) or else you are automatically into paying the balance over the remaining 30 mnths at the 29.9%.

The interest free period is often one year. Maybe the applicant had a bonus or some other lump sum due which they were going to use to clear the loan within the interest free period. Indeed maybe they had the entire cost of the purchase, and they worked out if they owed a lump sum of say 2500 euro at the end of the one year interest free period that the present value of that 2500 euro in one year at 5% ( rate of inflation ) is 2381 euro. Personally I love discounts .

 

[Buddyboy]

Re: Loans and intrest payable to large electrical store

Demoivre,
I agree with you. The interest free period can be used intelligently as you suggest. I worry, and maybe I'm wrong (and am not the original poster let's not forget), that some people may be attracted to the interest free period and are sucked into the high interest trap afterwards.

Maybe I'm not giving people enough credit for seeing the danger of such offers.

 

[pinkyBear]

Re: Loans and intrest payable to large electrical store

Hi Demoivre,
Even if there is an interst free period, for a purchaser under those conditions it would be cheaper to put it on a visa card (with a 6/9 month interest free period).
My bug bear about these "loans" is that it would be unlikely that a purchaser will over a year have the loan paid off - and some people can be tempted to take this year as a "breather" for paying the loan.. very often these people are not well paid and find themselves being hit by higher interest rates as a result....

 

[ClubMan]

Re: Loans and intrest payable to large electrical store

Caveat emptor.

 

[sinbadsailor]

Re: Loans and intrest payable to large electrical store

I think we are all forgetting that the reason these companies get people into these agreements is the convenience of it all.

You can walk in off the street and buy something that you don't have the money for.

From what I can see there are 2 types of people that use these loans.

1. The people who understand the rip-off but can be regimented enough to manipulate the years interest free credit and then pay it off later, good result.

2. The people who want it now, don't understand what they are getting into and just think that 'sure I can afford the monthly payment'....never mind that they will end up paying twice the price over the term.

This is the bad side of the consumer credit market. As a consumer we are relentlessly targeted to buy on credit, hey, if we get into trouble in the long run, sure wont we have a raft of sub-primes to bail us out and 'consolidate our debts' albeit into an affordable, monthly repayment.....start again

 

[ClubMan]

Re: Loans and intrest payable to large electrical store

1. The people who understand the rip-off

What rip-off? Aren't the terms and conditions of such agreements explained in detail on the form or accompanying documentation? Whether people bother to actually read this is another matter.

 

[ClubMan]

Re: Loans and intrest payable to large electrical store

Hi Demoivre,
Even if there is an interst free period, for a purchaser under those conditions it would be cheaper to put it on a visa card (with a 6/9 month interest free period).

Not necessarily. Chances are they would need to get a new card with one of these interest free offer period and pay €40 government stamp duty for the privilege. In contrast a 6-12 month interest free period on a loan agreement is better value once the loan is cleared before any interest (e.g. at c. 30%) kicks in.

My bug bear about these "loans" is that it would be unlikely that a purchaser will over a year have the loan paid off

Why is this unlikely?

and some people can be tempted to take this year as a "breather" for paying the loan.. very often these people are not well paid and find themselves being hit by higher interest rates as a result....

So what? That's their own problem surely? Certainly not a reason in itself for even further/tighter regulation of the credit market impacting everybody else and not just those who can't/won't manage their finances prudently if that's the insinuation?

 

[wavejumper]

Re: Loans and intrest payable to large electrical store

there was a loan application beside the till.
I also noted the occupation of the applicatant - a machine operator.

you should have brought to the attention of the shop the fact that they are in breach of the data protection act if they so carelessly leave customer documents free for all to view.

 

[sinbadsailor]

Re: Loans and intrest payable to large electrical store

What rip-off? Aren't the terms and conditions of such agreements explained in detail on the form or accompanying documentation? Whether people bother to actually read this is another matter.

Whether we are told about it or not 20+% interest is a rip-off and only designed to catch people out and nail them.

These shops will do anything to get you to give them details for credit rating checks and possible credit for a purchase. I have had assistants say 'sure it won't hurt to try for the credit, all it takes is a few details. if you get accepted then you can decide if you want to pay up front or not...'

I can see why people get caught out. They make it seem like 'everyone is using this credit, it's great' and the 'jones' factor' kicks in

 

[hjrdee]

Re: Loans and intrest payable to large electrical store

Whether we are told about it or not 20+% interest is a rip-off and only designed to catch people out and nail them.

These shops will do anything to get you to give them details for credit rating checks and possible credit for a purchase. I have had assistants say 'sure it won't hurt to try for the credit, all it takes is a few details. if you get accepted then you can decide if you want to pay up front or not...'

I can see why people get caught out. They make it seem like 'everyone is using this credit, it's great' and the 'jones' factor' kicks in

I would actually agree with Clubman on this one. Surely it is up to the individual to decide if the purchase is good value or not, taking the Interest rate into consideration. If some people think it is they should not be denied the oppurtunity to purchase by an overregulated market. There has to be freedom of choice for people. The fact that their choice may not be to the agreement of others is irrelevant. I think its more important that more is done to educate people to better understand terms like APR, Interest rates, etc, so that they would be able to decide for themselves they should make the purchase taking the interest into account. Knowledge is power in this instance!

 

[bullbars]

Re: Loans and intrest payable to large electrical store

Whether we are told about it or not 20+% interest is a rip-off and only designed to catch people out and nail them.

If your told about it and still avail of it, you have little grounds to complain!

 

[Caveat]

Re: Loans and intrest payable to large electrical store

I would actually agree with Clubman on this one.

Hjrdee, your phrasing/tone implies that 'agreeing with Clubman' might be a rarity!

 

[ClubMan]

Re: Loans and intrest payable to large electrical store

Whether we are told about it or not 20+% interest is a rip-off and only designed to catch people out and nail them.

I disagree that this is a rip-off unless the rate charged is not divulged or differs from that mentioned (both illegal).

These shops will do anything to get you to give them details for credit rating checks and possible credit for a purchase. I have had assistants say 'sure it won't hurt to try for the credit, all it takes is a few details. if you get accepted then you can decide if you want to pay up front or not...'

And a consumer can do one single, simple thing to avoid this - say "no".

I can see why people get caught out. They make it seem like 'everyone is using this credit, it's great' and the 'jones' factor' kicks in

Then some people are just gullible?

 

[MrMan]

Re: Loans and intrest payable to large electrical store

From past experience of working in that sector I can say that the major money for sales agents will come from selling items on 'finance'. I remember one instance where we had a 60" Tv selling at €5,999 and a girl & partner got it on 5 years finance at the 29.9%. She tried to get it at Curry's, but couldn't because she had already bought a similiar amount on credit for her new kitchen so she would have had close to €12,000 at 29.9% over 5 years! It made no sense, but she was after the immediacy factor, she wanted the best and now!

On the rip off debate, its hard to call because like clubman said the facts are there to be read so people just choose to ignore them or are just gullible, but there are aggresive sales people who will push people into making very quick binding decisions, and from experience it was mostly people who were from less prominent areas, so I would feel some degree of sympathy like the OP did, because not everyone has the savvy or the 'life experience' to simply say no.

 

[z108]

Re: Loans and intrest payable to large electrical store

Then some people are just gullible?

Its a base business which relies on parting people of low IQ from their money.
How I feel is it depends how the product is presented. If the consumer can demonstrate they understand the deal they are accepting for themselves then I have no problem with it as its their choice.

 

[ClubMan]

Re: Loans and intrest payable to large electrical store

On the rip off debate, its hard to call because like clubman said the facts are there to be read so people just choose to ignore them or are just gullible

It's the consumer's own fault if the information is there and they fail to read it. How many times have we read on AAM about people who did just this and the some time down the road had a problem with some financial product where they admitted that they failed to bother reading what they signed at the outset?

but there are aggresive sales people who will push people into making very quick binding decisions

How aggressive in practice? I can't imagine many situations in which a "no" or "please go away" would not deal with such a problem.