T he top testimonial for payday loan company Smart Pig is from someone without a surname, who declares in block capitals: “I love you Smart-Pig.com! You are my favourite pig ever! Who needs Peppa when you’re in my life!”
“Noor ” has clearly only met pigs willing to give her a 782% representative APR loan, a full 1% worse than the offer from Smart Pig.
Smart Pig is just one of a number of high interest payday lenders now offering their services to students. Their adverts, which have been reported to the Advertising Standards Agency (ASA). highlight prizes you can get your hands on, including the opportunity to “win a term’s rent”. All in a space they could have used to explain their APR.
A worrying number of undergraduates are turning to payday loans. Around 2% of undergraduates used them last year, according to a survey by the National Union of Students (NUS). This may not sound like a lot, until you consider this means up to 46,000 students are risking the debt spiral associated with payday loans.
Peachy Loans have recently had complaints upheld against them by the ASA for an advert they ran on sandwich wrappers in cafes opposite university campuses and colleges. The campaign, it was found, encouraged a casual attitude to taking out a loan. Its slogan was: “Small bites put a smile on your lips! You can now get a loan from £50 to £500 and pay it back in small bits. ” emanating from a cartoon mouth.
People willing to take financial advice from their sandwich wrappers may seem like a financially unsound group unlikely to return your investment but, unfortunately, these are probably the same group of well-meaning but naïve people that will incur late fees.
There’s a reason payday loans companies use such trite campaigns, and it’s the same reason email scams are so poorly written. You and I may realise the emails are obviously a scam, but that’s because we’re supposed to.
Scammers deliberately use terrible spelling and implausible stories because it weeds out “false positives”, according to research from Microsoft. These are people who will likely figure
out it’s a scam before they send off their money.
In the same way, adverts for payday loans weed out the people they’re not interested in, until all they’re left with are the incredibly desperate or the young and unreasonably optimistic.
There is money to be gained from the people optimistic enough to think APR won’t apply to them, as implied by Wonga’s now banned advert which claimed their 5,853% APR was “irrelevant”.
Payday loan companies aren’t looking to attract people who might look up what their interest rate actually means. They’re looking for more vulnerable people.
People who look at smiling pigs with top hats carrying bags of cash and don’t see a monumentally large danger sign. People who are paying attention to the singing Austrian girls handing people wads of money in TV adverts, and not the alarming text at the bottom of the screen.
Or they’re looking for people far too desperate to care. All too often students fit into this latter category.
Other options are available
Student Money Saver’s advice is to go to your university or student union for financial help. No matter how desperate things seem, advice and financial help will be available.
Hardship funds are available to you from your university when you are in dire financial circumstances. Hardship funds are lump sums or installments paid to you when you can’t afford the essentials, such as rent payment, utility bills or food.
Usually these are lump sums or installments paid to you, which you won’t have to pay back. In some cases your university will give you money as a loan, but without the massive rates of interest offered by payday lenders. Talk to your university and they will help you.
You can also request a higher bank overdraft if you haven’t done so already. Banks know students are likely to be high earners when they graduate, and so are likely to allow you this extension as an investment in your loyalty. If one bank won’t offer you an extended overdraft, shop around for a bank that will.
James Felton is the content editor of student finance website Student Money Saver .
Category: Payday loans