At some stage in life most people are likely to borrow money. You may need to borrow money to purchase a house in which case you would look for a mortgage. You may want to buy a new car so you may get a car loan or buy the car on hire purchase. You may also want a credit card for day-to-day expenses. Credit and loans are both ways we borrow money.
There are many different types of credit and loans. Borrowers should get the right loan for their needs and should shop around for the best loan.
Consumers who borrow money in Ireland are protected in legislation by the Consumer Credit Act 1995. This Act covers all types of credit and credit institutions must comply with this law. The Act also prescribes the ways in which credit may be advertised. If you are having trouble paying off a loan that you have taken out previously the Money Advice and Budgeting Service (MABS) may be able to help.
Generally, banks, building societies and other credit institutions charge for the use of borrowed money. This payment is called 'interest' and it is calculated on the amount of money you borrow and the length of time that you borrow it. Financial Institutions may also charge fees to cover their administrative expenses. Check the cost of taking out credit or a loan. Find out the costs and your ability to repay them. The National Consumer Agency provides information about personal loans.
If you are borrowing money or buying goods on hire purchase it is important that you:
Ensure that you can afford to borrow
Make sure that you can afford to pay back what you are going to borrow. Be realistic about your living costs. Make sure that any money you have left after you pay for essentials is sufficient to cover the cost of a loan. Can you save enough money to buy what you need rather than getting a loan? You can also reduce the amount that you may need to borrow by using money that you have saved.
Get a loan to suit you needs
There are many different types of loans and credit. Each type of credit is suitable for a different purpose. Some are more suited to short-term borrowing and others are more suited to medium to long-term borrowing. Some loans are quite flexible while others are not flexible or are only flexible if you get a variable interest rate. A variable interest loan means that the amount that you pay back can change (up or down) when interest rates change.
Shop around for the best value for your money.
Banks, building societies and credit unions all offer a range of loans. When comparing charges for the use of borrowed money, interest on loans must be presented as the Annual Percentage Rate (APR). The APR states what percentage of the amount you borrow you will be charged, in addition to paying back the loan amount. It is important that you compare like with like. Loans can be paid pack over different terms or lengths of time. You may think that you are getting a good deal on a loan with a low APR but if you are paying more instalments over a longer period of time you may find that it will cost you more. Cost of credit is another way of comparing loans which looks at the total cost of the loan.
The Central Bank authorises banks, building societies and credit unions. You should only borrow from an authorised financial service provider. This protects you and your money from unscrupulous lenders. If you are unsure if the company that you are dealing with is authorised contact the Central Bank to find out.
If you have ever used credit before you will have a credit history. A credit institution can refuse to give you a loan if you have not complied with the terms and conditions of previous loans. The Irish Credit Bureau keeps a database of all borrowers and credit institutions can check the status of previous loans taken by a potential borrower. You can find out more about your credit rating and the Irish Credit Bureau.
Your entitlement to privacy is protected and there are rules about lenders contacting you. When you have entered into a credit agreement, the Consumer Credit Act 1995 protects your rights. For example, the Act prohibits visits or telephone calls from an authorised financial institution about the agreement to you without your consent at any place between 9pm and 9am weekdays, or at any time on a Sunday or public holidays. Calls or visits to your place of employment are prohibited unless you live there, or if reasonable efforts to contact you have failed. Only the person(s) involved in the credit agreement may be contacted (unless other arrangements have been made). You can get more information on privacy in relation to credit agreements.
The National Consumer Agency (NCA) provides information and education about the costs, risks and benefits of financial products and promote the interests of consumers of financial products. The NCA provides a range of consumer guides and information on financial products:
4 Harcourt Road
Opening Hours:- Lines open Monday - Friday 9am - 6pm
Tel:(01) 402 5555
Locall:1890 432 432
Fax:(01) 402 5501
Contact information for the network of Money Advice and Budgeting Service (MABS) offices throughout Ireland is available:
Westend Commercial Village
Tel:(01) 812 9500
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.