Red Or Black

I don't really know how all this stuff works but isn't the whole point that if you took out a 30 day loan but then didn't repay it for a year, you would end up owing 4212% because they add the interest on? Obviously they don't "offer" a year long loan at 4212% - but if you didn't pay it back in time that's still how much you'd owe?

Wonga charges the equivalent of just under 1% interest per day and that rate is applied to the loan amount and transmission fee for the period of the short term loan - usually between one and 31 days. The annual rate of interest is 360%.

APR was designed to compare the cost of loans or card balances of several years. For a Wonga loan of a few days or weeks, the equation not only multiplies the actual period of interest up to a year's duration, but also compounds it, assuming interest-on-interest many times over. The result is a grossly distorted number that bears no relation to the actual interest involved.

From Wonga's site:

We make every effort to avoid that situation and the vast majority of customers repay our trust in them. So we hope it never comes to this, but here's a straightforward explanation of what could happen if you don't settle your balance as promised...

If our early morning collection attempt is declined by your bank - because you haven't ensured there are enough funds available - we will do our best to contact you throughout the day. We always hope to resolve the situation that day but, if we still haven't received full repayment by 5pm on the promise date, you will incur a £20 missed payment fee towards the cost of a failed collection . We will then make further attempts to collect the money and also keep trying to contact you to discuss the situation with you as soon as possible. We may try to debit your debit card at a later stage and on more than one occasion after 5am on the promise date for all or any part of the amount due. If you have provided us with details of a second debit/credit card and we are unsuccessful in collecting payment from the first debit card, we may seek payment from the second debit/credit card and on multiple occasions, for all or any part of the amount due, as we determine necessary until full repayment is made.

Your account will be handled by our professional and friendly collections team. They will do their best to come to an arrangement with you and help you resolve things, which is always our goal. Wonga doesn't believe in hitting you with multiple charges, like most traditional lenders will, but interest will continue to accrue on your balance for up to 60 days if we can't reach a fair agreement in the meantime .

Wow, biggest cash prize ever given away on British TV just then on RoB.

Turns out it was leaked, surprised I didn't read about it then!