These range from quasi James Bond spoofs where Q tries to find new ways to get money even faster to us, to lovable aliens in UFOs telling us how they got their loan.
All a bit of a laugh until you the small print appears on the screen. Suddenly you see the rates of interest charged. Forget Mario Draggi and ECB interest rates at .25% these guys’ rates start at 300% and can double or treble. Welcome to the world of legal money lending.
Legal Money Lenders. Of course what they do is legal but is it moral? It is a question as old as society itself. We can’t delude ourselves that these lenders ply their work in the world of satellite TV. Thanks to a Central Bank report published today we learned that 360,000 people in Ireland use the services of licensed moneylenders. That is an increase of 60,000 people since the last report in 2005.
The average size of loan is between €200 and €500 with the average term of the loan around nine months. So what kind of interest rate would you need to pay? Hold your breath and try to get your head around a rate of 125%.
Those totally legal lenders also supply lovely slides on their websites to help you calculate what you will have to pay. Bless their hearts. You want €300 but want a year to pay? Well, that would be €468 please. OK, only €9 a week but still you pay a whopping €186 extra over the year. What was I saying about morality?
The timing of the report couldn’t be better. Christmas is only a kiss under the mistletoe away. Santa’s letterbox is bulging as we speak. We all feel pressure to make sure the house is full, the kids are happy and the neighbours outspent. If you feel pressure, don’t worry. Your friendly legal money lender is here to help. And once Christmas is over, well then it’s not long until Communion time. The wheel keeps turning. But it’s all legal.
One company has decided to take licensed money lending to a whole new level. I won’t name them as I don’t want to give them publicity. Instead of money they offer their clients One4All vouchers. I was so intrigued by this and headed to their website and used their sliding calculator to see the cost of a loan.
I think I needed €500 worth of vouchers but feel I need a year to pay it back. The good news is I only have to pay €15 a week. Great! Oh but by the end of the year I would have paid €780 or a whopping 157.3% interest. Here in Newstalk towers we are waiting to hear from An Post as we want to know if they have heard of this practice and if they can do anything about it. Watch this space.
Madness. But also sadness. People feel pressure to take these loans. Who am I to judge the borrowers? The problem is they fall outside the normal lending criteria. Banks ignore them while they may not be familiar with Credit Unions. Enter your eager legal money lender.
It would be churlish of me to say, “Don’t do it.” I don’t know what pressure people are under. Circumstances mean I can save but what if I couldn’t? I do think these forms of easy credit must be challenged by the mainstream lenders. Call it market opportunity. There is a client base out there. I’d rather think it’s about social responsibility but there you go.
