Moneylending agreements can be for short-term cash loans or for goods bought on credit, generally with a very high interest rate. If you are thinking about borrowing from a moneylender, it’s a good idea to look at your other options first.
If you are struggling to pay back a loan to a moneylender, we can help.
What is a moneylending agreement?
To be classed as a moneylending agreement it must be provided by a licensed money lender and one or more of the following must apply:
- The agreement or negotiations (or both) were made away from the moneylender’s business premises.
- You make your repayments to the moneylender or their representative at any place except the moneylender’s business premises.
- The agreement has an APR (annual percentage rate) of 23% or more.
Banks, building societies, insurance companies, pawnbrokers and credit unions are not moneylenders.
What is APR?
The annual percentage rate (APR) is what it’s actually costing you to borrow money over a year. It includes the interest rate and other fees, averaged out over the full term of your loan.
The interest rates on moneylending loans vary, but can be as high as 187% APR.
The higher the percentage, the more expensive it is to borrow. The APR can be useful to compare loans.
When you are borrowing from a legal moneylender, always look for the total cost of the loan. This is the amount you have borrowed and the interest you will have to pay back.
How can I tell if my moneylender is legal or illegal?
Illegal moneylenders don’t have a license. Legal moneylenders do. Illegal moneylenders might seem friendly at first but borrowing from them is never a good idea, even if you feel you have no other options. You do not have the protections of the Central Bank if things go wrong.
If you think a moneylender is operating without a license, you can speak in confidence to the Gardaí.
If someone offers to lend you money, or to sell you goods on credit for a charge, check if they have a license on the ‘Register of Moneylenders’ before borrowing.
If you are struggling to pay day-to-day bills, a moneylending loan can make the problem worse. Contact MABS for free confidential advice to help get you back on track. Or if you feel you are able to tackle your debts yourself, read more about tackling debt.
What other options do I have instead of a moneylending loan?
Before borrowing from a moneylender, look at the options below.
If you are short of money, make sure you’re getting all of the benefits you are entitled to.
Credit union loans are usually more affordable. By law, credit unions cannot charge more than 12.68% APR. Some credit unions offer It Makes Sense loans.
You can compare the cost of personal loans using this free calculator.
If you have a bank account, you might be able to get an agreed overdraft. But be careful of going overdrawn without permission, this can be very expensive.
What rules must moneylenders follow?
By law, moneylenders must have a license and follow certain rules set by the Central Bank. Their agents must have a written authorisation and must comply with the law too. Here are some of the rules:
Moneylenders have to:
- Include prominent high cost warnings in their advertisements for all loans where interest is charged at a rate of over 23%.
- Warn you it’s a high cost loan if the loan APR is over 23% (See APR).
- Tell you the total cost of the loan. (how much you borrow and how much you’ll pay back).
- Be clear and open about all the loan fees, charges and interest you’ll pay.
- Tell you about MABS early-in-loan agreements if the credit is required to pay for accommodation, food, electricity, heating, medication or other similar costs.
- Tell you the total amount of repayments due if you have more than one loan with the same moneylender.
Act professionally in your best interests
- Act honestly, fairly and professionally, with skill, care and diligence and in your best interests (and the integrity of the market).
- Gather information from you to make sure the credit being offered is suitable for you.
- Not put undue pressure or undue influence on you.
- Not give you a discount that is only available through a moneylender’s credit facility.
- Help you to understand the product provided and not mislead you. This includes the method of repayment, all interest payments, charges and the cost per €100 borrowed.
You have to be given a written moneylending agreement which should:
- Include the words ‘Moneylending Agreement’ in a prominent place
- Include your name and the lender’s name and company address
- Include the total amount of credit, the interest rate and the total amount you’ll pay
- Include any collection charge (for door-to-door lenders)
- Be signed by both you and the lender
- Tell you about your right to a 10-day ‘cooling-off’ period
You’ve got time to change your mind about the loan without feeling under pressure. This is known as the ‘cooling-off’ period.
But remember, the ‘cooling-off’ period can be waived, which means you cannot change your mind. You’ll have to sign a separate part of the form agreeing to this.
You have to be given regular account statements or a repayment book updated with each payment showing the new balance due. This keeps track of what you’ve paid and owe. If the book is removed, you must be given a receipt for it.
If you have multiple loans, you have to be told how payments will be shared between them.
Find out more about the rules moneylenders must follow when lending you money.
If you are struggling to pay back a loan to a moneylender, we can help.
If you get stuck or unsure what to do next, feel free to get in touch with MABS.
Facebook
twitter
Instagram