Mogo

I saw an ad on Facebook for a company called Mogo that promised quick and easy loans for Canadians. I guess I'm seeing a lot of Canadian ads since I'm at my parents' house. Anyway, the stated goal of this company is to "save Canadians $1 billion" on consumer loan interest compared to NSF fees or payday loans or something. I checked out their site and it's very well designed with a lot of lower case text and smiling models. However, nowhere do they list the actual interest rate, only $x fee per $100 borrowed.

Digging deeper, one of their programs is called quick money which offers 2 week loans. You can borrow up to $1500 or 60% of your net pay, and the fees are $18.50 per $100. At first glance, that looks like 18.5% interest, pretty high but comparable to credit card interest rates. However, that's $18.50 per $100 per 2 weeks. If you just multiply that out by 26, it's equivalent to ~480% interest! I know you're not supposed to hold these loans for an extended amount of time but that seems really expensive. The website advertises that it's still "cheaper" than regular payday loans (really?) or bouncing a check and paying NSF fees. It even says you can use the loan to avoid credit card late fees. If you really had credit card debt, it's probably cheaper the pay the minimum amount due plus the credit card interest which is ~18%-25% APR.

Is unsecured short term consumer loan that expensive where 480% APR is cheap? Doesn't this just push people deeper into debt? I guess if it's truly an one-time cash flow issue, then paying exorbitant interest fees for 2 weeks is okay. Also, why isn't there consumer disclosure laws requiring companies to state equivalent APR? The $x fee per $100 statement looks like a way to hide the fact you're being charged 100x interest versus a secured mortgage loan. It would be really interesting to see Mogo's default rate and what their margins are.