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Short term loans with massive interest rates

People are being warned to be careful of a new online lending service which encourages bad habits.

Monday, June 20th 2011, 10:08AM 1 Comment

Finnish firm Ferratum Group has set up its mobile microloan service in New Zealand offering cash to borrowers at high interest rates.

Ferratum says it offers "Kiwis a quick fix solution to urgent financial problems" by providing short-term, unsecured quick cash loan by a mobile phone.

It is offering loans of up to $600 for terms of one day to 30 days, but says that it may look to loan bigger amounts to existing customers in the future.

While the system is a good example of how mobile phone technology it being used it's not a great way to improve New Zealander's financial behavior, publisher Philip Macalister says.

"Services like this are encouraging people to take on unnecessary debt and to treat money like it is something that grows on trees," Macalister says.

He is critical that the Ferratum website doesn't make clear what rates of interest and fees people are paying.

"It's like send a text and free money appears in your account."

"To find out what the interest rates are users have to read through an 18 page terms and conditions document. This is not the easiest thing to do on a mobile phone."

In the schedule (see here) interest rates range from 91% for $100 borrowed for seven days through to rates of more than 500%.

Ferratum New Zealand director and country manager Richard Yoon says "this kind of access to emergency cash has been hugely beneficial to our customers across Europe. If you were in a supermarket with a trolley full of groceries and your EFTPOS card was declined, literally within a couple of minutes of sending us a text you could have available funds to complete the purchase."

 "New Zealand consumers are well protected by strict financial regulations and the robust legal system makes the country a perfect choice for financial services organisations to establish themselves."

 Yoon says early indications show that Kiwis will be quick to pick up this new and fast mobile cash loan service, which he believes could eventually be extended to include other loan products in the financial market.

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Comments from our readers

On 21 June 2011 at 1:04 am Michael Donovan said: was approximately 5 years ago when I wrote to my financial colleagues with an article titled a "PARADIGM SHIFT".

The content focused on the fact that I predicted the demise of at least 5 NZ Finance companies due to the results of my research that there were many who were lending on cars...sight unseen, as the bosses of those finance companies "forced" (encouraged) their brokers to lend out the huge amounts of money flowing into their 'back doors.'

As it turned out, I was wrong (or to be more accurate...I was not accurate in my choice of numbers), because as we all now know, I was closer to 100 out because that is more like the number of failed ones..!

Back in those days people used to 'bleat' at what they called rip-off finance companies who charged interest rates of 12% or more.

In my "paradigm shift" paper I made the point that we were set to experience a resurgence of the age-old problem which contributed to giving the finance company 'profession' a bad name.

That problem is known as LOAN SHARKING. prediction has unfortunately come true, and this new 'offer' from Ferratum is a classic example.

The others are the number of private lenders here in NZ who know that they are part of a much smaller 'group' than were around in those good old hay-days when everyone who owned property was a potential lender, so these smaller numbers of lenders reckon it is ok to use the 'supply/demand' formula, so they charge often huge interest rates, because they know there are so many other fewer lenders competing with them to get their money loaned out.

So, don't just sit back and scoff at the Ferratum 'service' as being a sole example of loan sharking.
Support it if you can see merit in it, or search for a less expensive option, but supporting it must only further encourage 'loan sharking' so do you want that?
Michael Donovan
Commenting is closed



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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.95 3.29
ANZ 4.44 3.10 3.50 3.84
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.50 2.90 3.24
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.55 2.95 3.29
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.55 2.95 3.25
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.15 3.22 3.85
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 ▲2.29 ▲2.69 ▲2.99
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.49 2.49 3.29
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.29 - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.89 3.19
The Co-operative Bank - Standard 4.40 2.99 3.39 3.69
TSB Bank 5.34 3.30 3.69 4.04
TSB Special 4.54 2.50 2.89 3.24
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.15 3.49 3.89
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.89 3.29
Median 4.54 2.68 2.99 3.29

Last updated: 29 July 2021 9:04am

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