Moneylender Loan amountTerm APRWeekly repayment Total amount to repay Total cost of credit Cost of loan per €100 borrowed (%) €50025 weeks152% €25 €625€625 - €500= €125 €25 (25%) Moneylenders typically lend small amounts of money that is repaid at a high level of interest over a short period of time. There are a number of different types of moneylenders. Some, such as door-to-door lenders may give smaller loans between €100 and €1,500 that you repay, in cash, over a number of weeks or months. Others operate like financial institutions and offer larger loans of €1,000 or more. An example of the cost of a loan from a moneylender:
Applying for a loan Complete a form 1. Name, address and age 2. Employment 3. Income 4. Relationship with lender 5. Collateral 6. Amount required 7. Other loans 8. Purpose of the loan 9. Length of time to repay
Renting Leasing Use of goods but never own them Not responsible for repairs No asset depreciation
HP 2 stages: 1. The Hire 2. The Purchase 2 types of payment: 1. Deposit 2. Instalments The steps: 1. Purchaser pays a deposit 2. Purchaser makes instalment payment to HP company. 3. The HP company pays the seller for the goods. 4. The purchaser has the use of the goods 5. Purchaser becomes owner of the goods when final payment is made. Used to buy: cars, computers, electrical goods 1 Purchaser pays deposit to HP company 2 Purchaser makes instalments to HP company 3 HP company pays Seller in full 4 Purchaser has use of the goods 5 Purchaser make final instalment to become owner of goods
HP examples DepositInstalmentTotal 20010 x 40 = 400600 13015 x 75 = 11251255 18024 x 25 = 600780 25036 x 30 = 10801330
Credit Card MonthPrevious Balance Credit Purchases New Balance Interest 14%Balance + Interest Minimum pay Balance - payment Jan0150.00 21.00171.0015.00156.00 Feb156.00100.00256.0035.84291.8430.00261.84 March261.84200.00461.8464.65526.4960.00466.49 TOTALS450.00121.49 Very expensive:14% - 23% Can build up debt quickly: making minimum payments
Borrowing Types Short Term <1yrMedium Term 1-5yrsLong Term >5yrs OverdraftLoanMortgage Credit CardHPLoan RentLease Credit purchases Deferred payment Used for: Household billsCar purchaseHouse purchase Christmas buysStudent LoanHome repairs Unexpected billComputer system
Rights and Responsibilities RightsResponsibilities To know the APRGive True and accurate information To information about the No. of instalments Repay amount in full & on time To know the Amount of each instalment To know the Cash price To information about the Total credit price
Cost of Borrowing APR = annual percentage rate Flat rate APRFlat Rate Year 14000 x 10%4004000 x 10%400 Year 23000 x 10%3004000 x 10%400 Year 32000 x 10%2004000 x 10%400 Year 41000 x 10%1004000 x 10%400 TOTAL9001600
Bankruptcy A debtor who does not pay the amount owed can be declared bankrupt Through the courts
Mortgage arrears http://www.irishtimes.com/newspaper/finance/2011/1119/12243 07821516.html http://www.irishtimes.com/newspaper/finance/2011/1119/12243 07821516.html http://www.tv3.ie/article.php?article_id=64668&locID=1.2&page name= http://www.tv3.ie/article.php?article_id=64668&locID=1.2&page name ALMOST 100,000 of the State’s mortgages are in arrears or have been restructured, according to Central Bank data. About 8.1 per cent of home loans have fallen behind by 90 days or more, which accounts for 62,970 mortgages. The Central Bank’s figures do not include mortgages with arrears of fewer than 90 days. The number of mortgages in difficulty was closer to 150,000 when these numbers were taken into account. Banks repossessed 162 properties during the quarter (July/Aug/Sept), the majority of which – 119 – were voluntarily surrendered or abandoned. The remainder were repossessed by way of court orders. (averaging 648 PA) Total Mortgages90+ days arrears30+ days arrearsRepossessions 777,40762,970150,000648 100%8.1%19.2%.083% 21 November 2011
Debt Warning http://www.irishtimes.com/newspaper/breaking/2011/1121/breaking22.html It can take some people more than seven months to pay off debt accumulated in the run-up to Christmas, according to a survey by the Irish League of Credit Unions (ILCU). Despite the current economic climate, the survey showed Irish adults expected to spend on average of €562 each this Christmas. The survey indicated this level of spending would leave 38 per cent of people in debt. With less than five weeks to Christmas, the ILCU today urged the public to avoid borrowing beyond their means. “We have seen the impact of some of the toughest financial challenges play out in 2011. Worries over how to finance Christmas is not far from people’s minds,” ILCU chief executive Kieron Brennan said. He also warned people not to be tempted into using moneylenders, due to the extremely high rate of interest charged and also to watch out for credit card debt, as a high rate of interest will be charged to balances that are not cleared on time every month. The ILCU’s survey found 77 per cent of respondents did not feel any better about their financial situation than they did last Christmas. It also showed that 55 per cent of respondents said they intended to use general savings or cash to pay for Christmas, with 28 per cent using specific savings set aside for Christmas. Some 9 per cent will use their credit card with smaller numbers availing of credit union loans and money lenders. In terms of the recovering from over spending during the festive season, 34 per cent fo respondents stated that it will take up to three months to recover, 12 per cent suggested it would take four months or more and a small proportion of respondents say it will take over 7 months to recover financially from Christmas 2011. The survey also showed that women would take longer than men to recover from Christmas debt
Sourcing the cheapest Credit Card http://www.irishtimes.com/newspaper/pricewatch/2011/1121/1224307903491.html?via=rel http://www.irishtimes.com/newspaper/pricewatch/2011/1121/1224307903491.html?via=rel Comparing credit card rates can be an exercise in frustration. Providers that offer the most attractive introductory rates on balance transfers are generally not top of the list when it comes to the rate on purchases and the amount charged on cash withdrawals is different again. According to the National Consumer Agency’s www.itsyourmoney.ie website, the best value in the credit card market at present on purchases is 13.6 per cent APR from AIB on its Click card.www.itsyourmoney.ie The catch is that Click is available only to customers of AIB’s online banking service. The disparity in charges is well-illustrated by the fact that, of the cards compared by the NCA site, AIB also offers the worst value – 22.7 per cent APR on its be MasterCard. In terms of cash withdrawals – never a good idea on credit cards – the best you will get at the moment is 9.75 per cent from National Irish Bank on its MasterCard Platinum. At the other end of the scale, expect to pay an onerous 21.36 per cent on Bank of Ireland’s Clear and Classic cards. Bear in mind that companies usually charge interest on purchases only from the date that payment is due on your monthly bill – if you pay your credit card bill in full and on time each month, no interest will arise. However, companies generally charge interest on cash withdrawals from the moment the money is drawn down. Given the interest that can accrue, clearly paying off cards in full every month is the best option. For those unable to do so, a number of providers offer interest-free periods on transferred balances which can significantly reduce the build-up of interest, if managed very carefully. These include MBNA and OneDirect (10 months) and Permanent TSB Visa and Tesco (six months). The other option is for people to borrow elsewhere (such as credit unions charging lower interest rates) to clear credit card debt but this works only if you subsequently exercise financial discipline.
Bankruptcy http://www.bbc.co.uk/news/uk-northern- ireland-15694182 http://www.bbc.co.uk/news/uk-northern- ireland-15694182 Fermanagh businessman Sean Quinn - once believed to have been the richest man on the island of Ireland - has been declared bankrupt. He was granted a voluntary adjudication over an alleged 2.8bn euros (£2.4bn) debt owed to Anglo Irish Bank
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