Outstanding loans currently owing to alternative lenders total around €200m, new findings show.
Furthermore, nearly 60% of people borrowing from licensed moneylenders — outside of the usual bank, building society or credit union avenues — have some level of savings with a mainstream financial institution, according to the new Central Bank study.
Additionally, almost a third of borrowers are also borrowing from a mainstream credit provider at the same time, with some using newer loans to pay for outstanding ones.
Surprisingly, customer numbers for alternative moneylenders have only increased by around 60,000 to 360,000 in the past seven years; with the number of licensed lenders declining from 47 to 43 between 2007 and the end of last year.
While more than 80% of borrowers claim to be happy availing of alternative credit sources and are likely to use a moneylending service again, 14% said they felt trapped by their use of moneylenders. A quarter of borrowers also claim to experience difficulty in meeting repayments, with nearly 80% having missed at least one repayment.
The majority of lenders remain in the door-to-door space, though the market share of catalogue companies is growing. The Central Bank is still, however, keeping so-called ‘pay-day lenders’ — the likes of Wonga and QuickQuid — out of the market, saying they would be too difficult to regulate. As it stands, licensed moneylenders can offer rates as high as 187%, before collection charges are included, with 125% being the typical rate over a nine-month term, for a loan of between €200 and €500. It is understood that the Central Bank has, relatively recently, turned down approaches from international payday lenders looking to enter the Irish market.
The bank also has serious concerns about the real level of borrowers’ knowledge of loan costs and the reliability of credit-worthy assessments carried out by lenders. It is also concerned over the relatively low level — just over 30% — of people receiving rebates for having repaid their loans early.
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