If further proof was needed that both short term and payday loans are here to stay then it was provided by the latest announcement from Wonga, the major shortterm lender in the UK.
Despite being only four years old, Wonga have just raised an additional £73 million for expansion capital. The funds were raised from respected US venture capital firms, including Oak Investment Partners and Meritech Capital Partners.
The money will be used by Wonga to continue to grow their customer base. As part of the press release for the fundraising round, Wonga stated that they have provided short term loans to some 1.8 million customer since their launch, providing cash advances to those who were short of cash
While the growth of Wonga has mirrored the rise of payday and short term lending in the UK it has not been without it’s critics. With payday loan lenders in particular attracting a lot of negative publicity for loans which can have APRs of up to 400% before they have been repaid.
Wonga has hit back at these critics by noting that the majority of it’s customers only borrow funds for 7 days and with that sort of time frame a £200 loan would only cost £19. The short term loan provider also points out that first time applicants are restricted to a maximum loan of £400 initially.
The nationality of the latest round of investors is interesting as it shows that the UK payday loan market is attracting the attention of some significant US loan companies. While short term lending has shown explosive growth over the last few years in the UK it still lags well behind the US in terms of lending. It is this lag which the major US lenders are hoping to exploit in the UK.
