"A Loan Is Not Just for Christmas": Regulator

Press Release: The Financial Regulator today (Tuesday, 5 December) warned people to consider their choices when borrowing money this Christmas and to look for the most suitable loan for their needs, taking the overall cost of any loan into account before signing up.

Consumer Director, Mary O’Dea said, “Borrowing money at this time of year may be the only way for some people to meet Christmas expenses. But remember that once Christmas is over, the money is spent and you will have to make repayments long after the Christmas holiday. There are many ways of borrowing money, such as using an overdraft, taking out a personal loan, or spending on your credit card and while it might seem handy to use your credit card or in-store credit to pay for many of your Christmas expenses, these can end up costing you more in the long term. You will generally pay more for the convenience of in-store loans, using your credit card or availing of door to door credit collection. Think first what type of credit suits you best and how much it costs”.

"Once you have decided what type of loan you want, look beyond what the repayments will cost you every week or every month until the loan is repaid and ask the provider what the total cost of the loan is. This is what you will have to pay back to the lender in addition to the money you have borrowed. The cost of credit will vary depending on the amount you borrow, where you get your loan and how long you take to pay it back. The quicker you pay it back, the less interest you will pay. It can seem attractive to go for lower monthly repayments by taking longer to repay the loan but this will cost more because you will pay more interest. So weigh up what suits you best and how much you can really afford to borrow,” she added.

How much does borrowing money actually cost?*
· Jacqui borrows €1,000 from her bank for Christmas. Her loan is to be repaid over 12 months, paying back €89 per month**. In total she pays back €1,068 meaning the total cost of credit is €68.
· Pat borrows €500 from a moneylender to pay for Christmas presents. He pays back €20 a week for 32 weeks. The total cost of this loan is €140.***
· Claire borrows €700 from her local credit union where she has been saving for some time and has had loans in the past. She pays back €61.50 a month over the next year. The total cost of her credit union loan is €38.****
· Jim uses his credit card***** to pay for a few nights out running up to Christmas and presents for his family. When Jim gets his bill after Christmas, he owes €1,200. He pays €200 every month for six months, paying back a total of €1,200. At the end of the six months, he still owes €39 on his card due to interest.

The Financial Regulator provides free, independent information to help consumers make financial decisions. Cost surveys on credit cards and personal loans help people to shop around for the credit by showing the costs for products with the main providers in the market. A Guide to Personal Loans and Credit outlines the options for people who want to borrow money this Christmas, including loans from banks and credit unions, overdrafts and credit cards and the ‘Managing your money’ guide helps with planning and budgeting for the new year. All the Financial Regulator’s publications are available, free of charge, by calling the consumer help-line on 1890 77 77 77, logging on to www.itsyourmoney.ie or dropping into the Consumer Information Centre at 6-8 College Green, Dublin 2.

*The examples shown are based on typical rates for each product
** Sample bank loan APR 13.04%
***Sample moneylender loan APR 124.92%
****Sample credit union loan APR 10.33%
*****Sample credit card APR 14.9%