(f) Moneylenders A licensed moneylender is a person authorised by the Financial Regulator to provide loans. Moneylenders are not like regular financial institutions. They target their lending at people who cannot borrow from a bank, a building society or a credit union or cannot obtain a hire purchase agreement. Often this is because they have a poor credit history or are regarded as a significant credit risk. The loans provided are usually short-term.
When obtaining a loan from a moneylender the borrower should ensure there is a written agreement. The moneylender should also provide a repayment book or loan statement sheet to keep track of what has been paid and what is still owed. This should be kept safely as it is the only record of the payments made.
Evaluation of moneylenders Amount: Usually sums borrowed are quite small. Cost: Compared to other sources of finance, official moneylenders charge a very high rate of interest. Risk: The extremely high APR charged by moneylenders means that it can be very hard to completely pay off these loans. This can cause considerable financial stress and suffering. There are also unlicensed and illegal moneylenders who may not follow the regulations around money lending and should be avoided.
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5. What medium-term sources of personal finance are available?
(a) Term Loans Term loans allow consumers to borrow a sum of money for a fixed period of time (term) and repay it on a regular basis in agreed amounts (instalments). The money can be transferred into your current account and you can spend it. However, the money is not yours and the loan will have to be repaid.
A loan application form must be completed when applying for a loan. This gives the bank a full record of the financial situation of the person applying for the loan. The bank uses this information to decide on the ability of the person to repay the loan. When the loan is approved, the borrower then signs a loan agreement that outlines the terms and conditions attached to the loan.
