Finnish firm Ferratum Group has set up its mobile microloan service in New Zealand offering cash to borrowers at high interest rates. Already there's been a fair amount of concern as to what will happen to people who use this service in a casual way, and how much debt they'll accumulate within a short time.
If you pay the loan back quickly, this system will probably work in your favour, but if you let it ride, the amount you owe is going to increase exponentially. There is a schedule, but it's not something you can read through quickly on your cellphone - especially when you're wanting the money quickly. According to Philip Macalister, in the schedule (see here) interest rates range from 91% for $100 borrowed for seven days through to rates of more than 500%.
Ouch. Off the top of my head I can't work out what that will add to your loan, but I don't have any doubt that it's a substantial amount.
There are all sorts of loans available out in the big wide world - do we educate our kids as to how dangerous some of these can be? I just came across a common loan system (see title loans Raleigh NC for an example) that will lend money against your car, if you're over 18 and the car has a value of US$2500. A car isn't quite the best asset to be borrowing against, but I suppose it's a step up the lending ladder compared to borrowing via your mobile.
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