A government-backed scheme to provide low-cost loans from Credit Unions was launched in 2018 .
The loans are called It Makes Sense loans – and they provide small, low-interest loans for people on Social Welfare or State Pensions.
Avoid Moneylenders if Possible
The banks don’t normally lend money to people on social welfare or the state pension. This could result in some low-income families being tempted to use moneylenders instead.
Over 310,000 people borrowed almost €240 million from moneylenders in Ireland in 2018.
In Ireland, there is no law that states the maximum rate which a licensed moneylender can charge. However, in practice, the Central Bank can refuse to grant a licence if it decides the rates are excessive.
Unlicensed moneylenders will charge whatever they can get away with and some may use unlawful methods of recovery.
The maximum APR , excluding collection charges, that licensed moneylenders are allowed to charge in Ireland is 188%.
The rate of APR, when collection charges are included, can be as high as 287%.
A €100 loan at 287% APR would end up with interest charges of €30 over 6 months.
There are proposals in the pipeline to restrict the maximum interest rate to 1% a week or 48% a year.
Credit Union Loan Rates
These Credit Union loans should reduce the reliance on high-cost moneylenders.
The maximum interest rate that credit unions can charge for an It Makes Sense loan is 1% a month (which is 12.6% APR). For example- at a rate of 12.6% APR a €500 loan over 6 months would be charged total interest of €15.72.
For comparison – the lowest interest rate available on a personal loan from a bank is about 6%. See the list of the best bank personal loan rates here.
These Micro Credit loans can be for any purpose, including repayment of outstanding debt. The loans can be taken out for a minimum period of one month up to a maximum of 2 years. The minimum loan amount is €100 and the maximum amount is €2,000.
Credit Union Membership:
Applicants for a loan will need to become a member of the credit union – and anyone can join on the spot and be considered immediately for one of these loans. (provided that they live in the local area).
Usually, loans will be granted within 24 hours of becoming a credit union member and making an application.
Loan repayments are made by deductions each week from social welfare or pension payments via the Household Budget Scheme or by direct debit or standing order from a bank or credit union account.
These It Makes Sense loans are available nationally . An up to date list of Credit Unions that are issuing these It Makes Sense loans can be found here. There are about 100.
People in receipt of the following will be eligible to apply:
Note Being in receipt of social welfare does not entitle a potential borrower to a loan. The decision to grant a loan remains with the credit union.
Back to Work Allowance
Back to Work Enterprise Allowance
Jobseeker’s Allowance (and Jobseeker’s Transitional payment)
State Pension (Contributory)
State Pension (Non–Contributory)
One-Parent Family Payment
Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension
Widow’s, Widower’s or Surviving Civil Partner’s (Non–Contributory) Pension
Back to Education Allowance
Supplementary Welfare Allowance (basic payment)
Lowest Bank Loan Rates in Ireland