Moneylenders typically lend small amounts of money at a high rate of interest over a short period of time, which means the repayments are high.
There are a number of different types of moneylenders. Some, such as door-to-door lenders may give smaller loans between €100 and €1,500 that you repay, in cash, over a number of weeks or months. Others may offer larger loans of €1,000 or more.
Some shops that offer credit for furniture, electrical or other goods and some catalogue companies may be authorised as moneylenders. This is because they may charge over 23% APR. Under the Central Bank’s Code for Licensed Moneylenders, a moneylender must give you certain information before you take out a loan with them including fees, costs and interest. They must also explain that the loan has a high cost, if the loan has an APR (Annual percentage rate) of 23% or higher.
How do you pay back these loans?
Door-to-door moneylenders will usually want to collect your repayments from you in cash each week and you may have to pay a collection charge. If you don’t want to pay a collection charge, you can choose to make your repayments at the moneylender’s office. Some moneylenders allow you to repay larger loans directly from your bank account by direct debit.
A moneylender, or their collecting agent, must carry an identity card and is allowed to call to you to collect payment from Monday to Saturday, between 10am and 9pm. If you agree, they can also call to you between 8am and 10pm, but you must agree to this in writing beforehand.
- Contact you on Sundays or bank holidays or
- Contact your employer or your family without your written permission. It is usually more expensive to borrow from a moneylender compared to a bank or a credit union. The APR is usually at least 23% and in most cases, much higher. However, with a moneylenders’ loan, it is often better to look at the cost per €100 and the total cost of credit. The total cost of credit tells you the extra amount you have to pay on top of what you borrowed.
- An example of the cost of a loan from a moneylender:
Interest and how it is charged
|Loan amount||Term||APR||Weekly repayment||Total amount to repay||Total cost of credit||Cost of loan per €100 borrowed (%)|
|€500||25 weeks||152%||€25||€625||€625 – €500= €125||€25 (25%)|
Moneylenders are not allowed to charge extra interest or charges, other than collection charges. So if you miss repayments, the total amount you have to pay back should not go up.
How do you keep track of what you have paid?
Depending on the type of loan you get, the moneylender gives you a repayment book or loan statement to keep track of what you have paid and what you owe. Keep your repayment book or loan statement safe, as it is the main record of your loan and the repayments you have made.
Your repayment book or loan statement will show:
- The total amount of your loan and the rate of interest (APR) that will be charged
- The amount of each payment and the total number of payments due
- The amount of each collection charge (if any)
Each time you pay, the amount and date must be written on your repayment book, or recorded on your next statement so you have a record of how much you have paid and how much is left to pay.
What if you cannot afford to pay back your loan?
Start with our debt action plan which will help you to tackle your debts. If you have missed payments and are finding it difficult to pay back your loan, contact your moneylender as soon as you can. If you fall behind with your payments, a moneylender cannot:
- Charge you any fee or penalty or
- Give you another loan to pay off the first one
If you cannot sort out the matter directly with your lender, you can get help by contacting the Money Advice and Budgeting Service (MABS). They offer free, confidential and independent advice to people in debt and have at least one office in every county. They can help you:
- Draw up a budget
- Find out about any entitlements you may have
- Talk to your lenders and try to work out new loan arrangements for you
Check your moneylender is regulated
The Central Bank’s Code for licensed moneylenders (PDF) sets out standards and rules on how moneylenders must deal with their customers.
- Do make sure the moneylender is licensed. It is illegal for a moneylender to operate without a licence. Check the Central Bank’s registers website. If an illegal moneylender approaches you and offers you a loan, do not be tempted to deal with them. Moneylenders operating without a licence should be reported to the Gardai
- Get details of your local MABS office by calling the MABS Helpline on 0761 07 2000 or from the MABS website