A reader recently told me he had taken out a loan for £650, with 18 monthly repayments of £147. This adds up to a total repayment of £2,650 – an eye-watering amount and more than four times what he borrowed.
At first I thought this was probably taken out several years ago. But in fact, it was borrowed in 2018 from Loans2Go.
Here is a snapshot of the personal loan page on the Loans2Go website, with my comments in red.
With these loans:
- you can choose to borrow between £250 and £1,000;
- all personal loans for 18 months at 990%APR;
- the quote above is for weekly repayments. You can also choose to repay monthly, as the reader did, or fortnightly. It makes little difference to the total repayment.
“Is it legal to charge that much interest?”
The loan was taken out by the reader when he was desperate. He probably didn’t think closely about the cost. But now he wants to know if it is actually legal to have to repay that amount. Unfortunately it is.
High Cost Short Term (HCST) lenders can’t add more in interest and charges than the amount borrowed. If that payday loan price cap had applied to this Loans2Go loan, the maximum repayment would have been £1,300.
But the FCA’s definition of High Cost Short Term Credit says it only applies to loans of 12 months or less so the FCA’s price cap rules don’t apply to this loan.
(There is a small point in the definition that says it also covers loans which are to be “substantially repaid within a maximum of 12 months“. But I think that is there to include loans that are just over 12 months long, for example if the final loan repayment was on the borrower’s next payday after 12 months, and to stop a payday lender introducing a 13 month loan product to evade the price cap. I don’t think it’s there to cover 18 month loans.)
I think the price cap should apply to longer loans
I can’t think of any reason why this 18-month loan should not be subject to the same price cap as a 12-month loan.
Going for a longer term loan will normally result in lower and more affordable monthly payments.
But the repayments on this 18-month loan are higher than they would be for a 12-month payday loan! A £650 12-month loan from a payday lender would be about £100 a month in repayments, so that is paying a lot less a month and for a much shorter period.
I think the FCA should revisit the HCST definition to cover “medium-term loans” as well.
Do you know of a more expensive loan?
I don’t think this is the worst legal loan in Britain. Logbook loans (also sold by Loans2Go) and guarantor loans probably deserve that prize because they make it very hard for the borrower to enter any form of debt solution.
But is it the most expensive legal loan in Britain today, comparing what you borrow to what you have to repay?
If you have come across a loan where someone has to repay more than four times what they have borrowed, let me know by adding a comment below this article!
Ask for a refund for large bad credit loans
Complaining about a guarantor loan
How to ask for a payday loan refund
JOJO says
I got £3000 and had £9600 to pay back in total. Still paying now. I was stupid very stupid but on my road to becoming debt and high interest/PDL free thank God!
Anyone who has not broken the cycle yet do it asap these companies should be stopped or all capped.
I am in a DMP and have broken my cycle and it’s the best thing I ever done.
Ray says
Legal fraud should be illegal thieves
Michael says
I had a loan with Loans2go for £250
Which cost me £1019.52
I did manage to save £247 paying it early but still paid out over £750
Can I get some advice as I’m planning to complain as they have 100% Exploited people in a Vulnerable position
Sara (Debt Camel) says
Hi Michael – I think exploitation is a very good way of putting it :(
You can complain to Loans2Go saying something like you feel you were charged a highly unfair interest rate, you accept that what you would pay was explained to you, but you feel the lender exploited your situation to charged an abnormally and unfairly high rate of interest. Ask for a refund of the interest you were charged.
Expect Loans2Go to reject this complaint and then send it to the Financial Ombudsman, see https://www.financial-ombudsman.org.uk/consumer/complaints.htm.
Also reading https://debtcamel.co.uk/refunds-large-high-cost-loans/ which looks at an affordability complaint for this sort of loan. If you think the repayments were unaffordable, start with the template letter there for a complaint and add on a paragraph about how high the interest rate was and how you feel you were exploited.
steve says
Hi.
I had a loan with L2G my car broke down i couldnt make my payment so they took my car stating it was theirs to do what they want a scrap man came for my car and they received £300 for it when my loan was over £4500 and then they told me to pay balance remaining i only had a £1600 loan with them.
I put in an affordability complaint and they delayed a lot and i got final decision 13 weeks later after excuse after excuse and it was rejected.I sent the complaint to FOS and the guy who looked at all my loans including this one saw that the was many errors on L2G part and upheld my complaint and cleared my outstanding balance and i got just under £500 back in which i thought was disgusting as i had paid 5 times that. I lost my car for £500 really in my eyes but at least the loan was paid off and taken away from my credit file and now i can forget about it.
All i can say is if you are going to make a complaint about them be prepared to wait and wait as they play so many delay tactics
Pearlygirly says
High interest credit is a terrible thing. But some of the lower interest products out there can also end with the borrower paying many times what they borrowed. I know someone with what was originally a £15,000 loan currently at £56,000 and climbing. There is a CCJ and charging order. Blemain finance (secured loans don’t see them so much now) arent using outrageous interest to make their money but they add so many charges the debt soon spirals. Not to mention expensive but often pointless PPI, charges for not having or renewing house insurance ( they add their own to your debt and its typically 4 times the usual cost) and excessive charging for late payments, phone calls / letters chasing the debt etc. Interest is added to all these and it snowballs. Worst of all the loans are secured on property and people can’t easily get out if the mess it causes. Its worth checking all of these kinds of things before you borrow as some of the more benign looking lenders may have different traps for the unsuspecting, especially when things go wrong.
Christian white says
I borrowed a total of £700 from Loans2go. The original loan was for £500 (October last year) and I topped it up after getting texts from them in February this year. I was already in a DMP. I have borrowed to fund a gambling addiction so I have to take responsibility for something that has undermined my mental health and resulted in my home being repossessed. The loan was put into the DMP and Loans2go have come back and given my DMP company a balance of £2537 to pay off thus extending the plan further.
I have made errors before people judge me but I feel really strongly that giving a balance of £2537 is incredibly unfair. Do I have any way of making a serious complaint? Or is my own stupidity and recklessness likely to undermine any complaint I might have?
Any help or advice much appreciated. Thanks Chris.
Sara (Debt Camel) says
I am sorry you got caught by this horrible loan.
Did you have mortgage arrears at the time you applied for the loan or the top-up?
Can you say what your total debts are now, including this one and any debt from the house repossession?
Who is your DMP company and have you been making payments to them during the time your house was repossessed?
Christian white says
Hi the house was repossessed in 2011. The sale plus the 5 years I’d made repayments easily repaid the original loan + about £20000. Even so, still had interest of £45000 to repay. I’ve repaid about half but it’s been erratic. Total debts now are about £50000 (that’s the remaining interest from the repossession plus the debts in the DMP). I’m with Payplanplus. I’ve been with them since the house was repossessed. They’ve been brilliant tbh. But lots of the debt includes huge amounts of interest from high interest loans. The DMP is due to finish late 2020 because I’m making huge monthly repayments into it now.
Chris.
Sara (Debt Camel) says
Good luck with getting a lot of interest back and speeding things up!
You might also want to look at whether some of the older accounts in your DMP are still enforceable – credit cards, catalogues, old non payday loans etc – see https://debtcamel.co.uk/settlements-old-debts-cca/. This won’t tend to work with payday loans taken out online or if the debt hasn’t been sold to a debt collector.
Also have you checked for any PPI?
Sara (Debt Camel) says
re complaining about this horrible loan – use the approach on this page https://debtcamel.co.uk/refunds-large-high-cost-loans/, not the standard payday loan complaint. Also add a paragraph saying you think the interest rate was grossly unfair and taking advanatge of desperate customers. And take it to the Financial Ombudsman if the complaint is rejected.
It’s not an easy complaint but i think anyone who has been robbed this way should be complaining and saying how unfair it is.
Christian white says
Thanks Sara. Will look into the older debts and tackle Loans2go about the interest and let you know any developments. Cheers. Chris.