UK moneylender Amigo Loans has started lending in the Irish market, hoping to fill a “glaring need” by targeting people who have been turned down by traditional lenders, and offering loans of up to €5,000 at an annual rate of 49.9 per cent.
The listed lender, which has more than 200,000 UK customers, operates a guarantor model, whereby it lends to “people with bad credit”, who are backed by friends and family with a better credit rating.
"We believe there is a need to make access to credit possible for ordinary people who have limited credit history on file, often through no fault of their own, and cannot get a loan from their bank or credit union," said Daniel Hawkins, managing director of Amigo Loans Ireland.
Authorised by the Central Bank of Ireland last year, Amigo Loans has started lending to Irish customers from its Mount Street base, on amounts of between €500 to € 5,000 over one to three years at an annual cost, or APR, of 49.9 per cent.
According to Amigo, this is the fifth lowest maximum APR of all moneylenders operating in the Irish market. “The rate we charge is a fair rate for the product we offer,” said Mr Hawkins, adding that it looks to lend to “good hard working people who’ve been turned down for reasons such as credit rating”.
It’s understood that Amigo had been looking to lend for up to five years, but that the regulator had concerns about the cost of this to borrowers.
To apply for a loan with Amigo, an applicant will need a guarantor - 35 per cent of guarantors are parents, and 75 per cent are close family the company says - to step in and make a repayment if the borrower is unable to do so.
Amigo says that in the UK, 25 per cent of loan applications are typically household related, such as borrowing for a deposit for a rental property, with another 25 per cent for a car loan.
Rather than making an assessment on credit ratings, Amigo makes its lending decisions “strictly on affordability”, and will require Irish borrowers - and guarantors - to have a buffer, of €100 for the former and €150 for the guarantor, left over each month once all expenses and loans have been accounted for. In the UK, only about 15 per cent of applicants successfully receive a loan.
Amigo is keen to distinguish itself from other moneylenders, which can charge an annual cost of lending of upwards of 200 per cent.
“It’s important that people understand that Amigo is not a doorstep lender - we are not a moneylender that will appear at your door to lend or collect money. We are an online proposition, supported by real human beings, with loans collected via traditional methods, such as direct debit or online debit card payments,” Mr Hawkins said.
Amigo says it also doesn’t charge late payment fees, and borrowers will never repay more than initially agreed.
“They won’t be forever chasing a debt that’s spiralling,” said Hawkins.
It expects to pay out loans within 48 hours of an application, and loans will go directly to the guarantor, who will then pass it on to the borrower.
European expansion
Amigo’s Dublin office is the company’s first outside of the UK, and may be used as a launch pad into other markets.
“Initially we want to prove the concept,” said Mr Hawkins.
It’s understood that if the Dublin launch is successful, then Amigo might look to position Dublin as a hub for new European markets, including those in southern Mediterranean countries. Expansion into continental Europe would see the headcount at the Dublin office, which currently employs about 10 people, double over the coming months.
The arrival of Amigo into the Irish marketplace comes after credit unions are expected to increase their presence in the short-term lending market and offer a cheaper alternative. New legislation is expected to be forthcoming which will allow credit unions double what they can charge in interest to 2 per cent a month, or 24 per cent a year.
