Loans and social credit for low-income people in Ireland

For people on a low income in Ireland, the choice of lender often decides whether a loan helps or becomes a long-term problem. Banks may refuse someone on social welfare or with irregular hours, while licensed moneylenders will often say yes at a much higher cost. Between them, credit unions and a social finance loan designed with MABS offer a fairer route for small amounts.

This page deals with borrowing. If you need help you do not have to repay, start with our guide to emergency financial help in Ireland, which covers the Additional Needs Payment, St Vincent de Paul and MABS.

How lending is regulated

The Central Bank of Ireland authorises and supervises banks, credit unions, retail credit firms and moneylenders. Its Consumer Protection Code requires lenders to assess whether a loan is affordable and suitable for you, and to treat customers in arrears fairly. Before borrowing, check that the lender appears on the Central Bank's register of authorised firms. Unregulated lenders, including people offering loans on social media, give you no protection at all.

If you have a complaint you cannot resolve with the lender, the Financial Services and Pensions Ombudsman deals with it free of charge.

Credit unions: the first place to ask

Credit unions are member-owned cooperatives present in almost every community in Ireland. The interest they can charge is limited by law, so their loans are far cheaper than moneylender credit. Many lend to members on social welfare payments, and some will look favourably on a history of regular saving, even a small weekly amount.

• Join your local credit union and start saving regularly, even a few euro a week.
• Ask about small loans for essentials, school costs or Christmas, and how repayments can be arranged.
• Ask whether it offers the It Makes Sense loan described below.

The It Makes Sense loan

The It Makes Sense loan is a small, affordable loan offered by participating credit unions, developed with the support of MABS and social finance partners as an alternative to moneylenders. It is aimed at people receiving social welfare payments. It can be approved quickly, and repayments are usually made through the Household Budget scheme, so they come out of your payment automatically at a level you can manage.

Not every credit union offers it, and conditions vary, so ask your local branch or MABS which ones do. For a broader look at this kind of lending, see our page on social loans.

Licensed moneylenders and other high-cost credit

Licensed moneylenders often collect repayments at your door and lend without the checks a bank applies. They are legal and regulated, but their annual percentage rates can be many times those of a credit union. Their licence conditions require them to show the cost clearly, and the Central Bank has added protections, but the total repaid on a small loan can still be very high.

The same caution applies to catalogue credit, store cards and buy-now-pay-later products: easy to start, costly when payments are missed. Before you take any of these, compare the APR and the total amount you will repay in euro. Our page on non-bank borrowing explains the main differences.

Borrowing on social welfare or irregular work

Being on Jobseeker's Allowance, a One-Parent Family Payment, a Disability Allowance or a State Pension does not by itself stop you from borrowing. What lenders look at is whether the repayment fits your budget once rent, food, energy and childcare are paid. A clear written budget, ideally prepared with a MABS adviser, makes it easier for a credit union to agree to a loan and harder for you to borrow more than you can carry.

If your hours vary from week to week, base your calculation on a low week rather than an average one. If you share costs with a partner or family member, agree in advance who pays what. And if the cost is for something specific, such as school uniforms or a replacement cooker, check first whether a Back to School allowance or an Additional Needs Payment could cover part of it, so that you only borrow the difference. Our page on borrowing while receiving benefits goes into more detail.

Your credit record: the Central Credit Register

Ireland's Central Credit Register, run by the Central Bank, holds information on loans of a certain size, including whether repayments are made on time. Lenders consult it when you apply. You can request a copy of your own report free of charge, and you have the right to have incorrect information corrected.

• Check your report before applying, especially if you have been refused credit.
• Arrears are recorded, but so are later on-time payments, so keeping up with an existing arrangement helps.
• Be wary of anyone offering to "clean" your record for a fee.

Before you sign: a short checklist

1. Check first for non-repayable help, including the Additional Needs Payment.
2. Borrow only the amount you need for the specific cost.
3. Calculate a weekly repayment that leaves enough for rent, food and energy.
4. Compare the APR and the total repayable from a credit union and any other lender.
5. Check the lender is on the Central Bank register.
6. If you already have arrears, speak to MABS before borrowing more.

When debts are already a problem

If repayments are already taking money you need for essentials, a new loan is unlikely to solve the situation and may make it worse. MABS advisers can contact creditors, negotiate reduced payments and explain formal solutions. The Insolvency Service of Ireland oversees statutory arrangements, such as a Debt Relief Notice or Debt Settlement Arrangement, which require advice from an approved intermediary or practitioner and have lasting consequences.

Finally, never pay a fee in advance to get a loan. Fake lenders advertise on social media, use names similar to genuine firms and ask for "insurance" or "processing" payments before disappearing. A regulated lender takes its fees from the loan itself or includes them in the repayments, and tells you the APR in writing.