Your money: borrowing money
Loans and other forms of credit are the main ways that we borrow money. Most people will borrow at some stage in their life, from buying a house or a car to having the convenience of a credit card for day-to-day expenses (so you do not have to carry cash).
Banks, credit unions and other lenders offer a wide range of loan deals, at various interest rates over different lengths of time, and with different administration costs. So, as in most things in consumer life, it's always best to shop around for the best deal for your particular circumstances.
The Central Bank / Financial Regulator is responsible for the regulation of most financial service firms in Ireland - the following is just a summary of the key issues of interest to consumers.
Consumer rights and obligations
If you have a loan with a financial institution you are a consumer of financial services, and therefore have certain rights and obligations.
The Consumer Credit Act sets down rules for these agencies, such as how they
- Advertise their credit deals
- Describe the cost of the deal in the agreement they draw up with you
The APR rate
By law, financial institutions have to give consumers an indication of the APR (Annual Percentage Rate) of each of their loan or credit deals (but not for hire purchase agreements).
The APR is a loan's total cost as a percentage of the total amount borrowed.
It provides a yardstick for helping consumers to calculate the true cost of different credit packages.
Credit history
Consumer legislation gives you some right to privacy when you enter into a credit agreement. However, when you sign a loan application you automatically give your lender permission to obtain information about your "credit history" from credit reference agencies such as the Irish Credit Bureau (ICB).
Anyone who has used credit before will have a credit history - which shows whether you kept up with your payments and the terms and conditions of previous loans.
A credit institution can refuse you a loan if you have a bad "credit history" or a poor "credit rating". Under Data Protection legislation, you are entitled to see your credit record, and to a correction of any inaccurate information about you.
You are entitled to a copy of your own credit history from the Irish Credit Bureau for a fee of €6. Contact the ICB at (01) 260 0388.
Types of loan and credit
If you do decide to borrow, find the right type of loan for your needs. Only borrow from an authorised lender. If you are unsure if the business that you are dealing with is authorised, check the Financial Regulator's Registers website or contact the Financial Regulator on Locall 1890 77 77 77.
There are many different types of loans and credit, with some packages suited to short-term borrowing and others more suited to medium- to long-term borrowing.
Before signing up for a loan, it is important to:
- Make sure you can afford to pay back what you are going to borrow
- Borrow the bare minimum
- Choose the right type of loan
- Shop around for the best value for your money
- Remember that if things do go wrong, there will be other costs that are not so clear. If you fail to meet repayments you may be liable to pay other penalties such as extra interest charges
Learn about your rights and your money
