Wonga offers short term loans for e-commerce purchases

Thursday, December 27, 2012 - 10:22 by Mike Price

There has been something of a media storm surrounding payday loan companies over the last few months, with many levelling criticism against them as a result of the high interest rates that they charge.

However, for many people, they have become a way of life and it does not look like they will disappear from the UK's financial landscape at any time soon.

One of the highest profile operators in this field is Wonga, which has now created a new scheme, that will allow people using safe shopping online to get a short term loan to cover the cost of buying a product from an e-commerce site.

Called PayLater, the project is only linked to Wonga and if you check out the small print, it certainly functions along the same lines as its parent company, according to Marketing Magazine.

When you get a loan from PayLater you will be able to buy a product via safe shopping online and then pay back its cost, on top of a transaction fee and 27.7% APR, over the course of the next 101 days.

This annual percentage rate is lower than the 4213% levelled against a typical Wonga payday loan and you even get three times as long to pay it back, which might make the scheme an attractive proposition for some consumers.

However, in the wake of the controversy surrounding payday loans, it seems that Wonga has been unwilling to make a big noise about PayLater.

So far the only retailer to sign up to offer PayLater to customers as a means of carrying out transactions is Cotswold, although more may join the scheme, depending on its levels of success.

Consumers getting credit for major purchases is nothing new, but using a branch of a payday loan company to achieve this is relatively novel.