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How Much APR Is There On A Wonga Loan?

Updated on August 5, 2012

If you are curious as to just how much APR Wonga actually charge on their loans then this page will tell you. We will have a look at the APR rates on loans from Wonga and give you a few more details about the company and the loans that they offer to customers. After reading this page you should have an idea of whether a loan from Wonga is something you should consider or not.

Wonga are a company based in the UK who offer short term payday loans to people. Currently they are one of the UK’s biggest lenders and they seem to lead the way when it comes to payday loans. However, the company has come under fire for the rates of interest they charge, or to be more accurate, the rate of APR. So just how much APR do you pay when you take a loan out with Wonga? Well let’s take a look and see.

A Close Look At APR

The APR Rate On Loans

So first of all, the reason for all this controversy is due to the fact that when people look for a loan, they often assume the APR is important. In most cases this is true, but when you are borrowing short term this can be different. Anyway, as an example, if you were to take a loan out with a typical high street bank, the APR you would pay would probably be around 6%. So some people see that figure and think this is a reasonable APR amount for a loan. Now compare that with the APR on a Wonga loan. The APR on a Wonga loan comes in at a staggering 4214%. That’s not a typo, once again it is 4214% APR.

So as you can see, when people see this huge figure they immediately jump to the conclusion that this company are taking advantage of people and charging an insane amount of interest. On the surface of it 4214% is extremely high, but you need to understand how APR actually works in order to really see what this company are charging people. So let’s try and explain how APR is calculated and what it means, as many people do not understand this.

Think Before Making A Decision

What Is APR?

So first of all APR stands for Annual Percentage Rate. So straight away the fact that this interest in calculated on an annual basis should tell you something. The example we gave you earlier of 6% on a bank loan, here the time the money is borrowed over is 5 years. Whereas with a loan from Wonga the time you borrow money for is a month at the longest. In fact you can actually borrow money for just a day.

This means the reason that the APR is so incredibly high is due to the fact that this is short term borrowing. So in realistic terms the 4124% APR figure is very misleading. What you should really be looking at is the amount of interest charged and how much Wonga loans actually cost in real terms. As an example, borrow £100 for 30 days and you will pay back a total of £136.72. So the interest charged would be £36.72. It is up to you to decide whether that is a reasonable amount or not, but as you can see, this figure is not nearly as scary as what you may expect based on the Annual Percentage Rate.

If you were able to borrow money from Wonga over the space of a year, then this would be massively expensive. In fact if you were to borrow £100 over a year the total you would have to pay back is £485! So as you can see, there is a reason why the company only offer very short term loans.

Interest Skyrockets

When Wonga Becomes A Problem

When used properly Wonga is not a bad way to borrow money. If you just need a small loan until your next payday then this is a company that is worth taking a look at. However, the problem comes when you do not pay the money back on time. The ways their loans work is that they will deposit the amount you require into your bank account, then on an agreed date they will collect the repayment in one lump sum. However, if you do not have available funds in your bank account then the problems start.

Wonga will continue to add interest every day that you do not pay back the money. They will also add charges when they try and take the money. If you don’t pay them back on the agreed date, then the interest starts to climb very fast. At this point that scary figure of 4214% APR should really start to worry you. If you look for Wonga reviews there are horror stories out there of people who have borrowed a few hundred pounds and ended up owing thousands because they have not paid the money back. If you do intend to borrow money, you must be sure that you can pay the total back on the agreed date.

As you can see the amount of APR that Wonga charge is truly frightening. But when you put it into perspective and understand how it works, you realise that for a loan such as this one the Annual Percentage Rate is not really all that relevant. If you are looking for a small amount of money over a short period then this company is not really all that bad. There are other lenders out there who lend money at different rates and over different periods of time, but for payday loans we would say that Wonga are probably one of the best.


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