Most lenders report details of customers' loan repayments to a central credit reference agency called the Irish Credit Bureau (ICB).
Missing repayments on a loan or making late repayments can damage people's credit ratings and also make it difficult for them to get another loan, including a mortgage, for up to five years.
Repayments on loans will be higher if borrowers opt for Payment Protection Insurance (PPI), which covers repayments for up to a year if borrowers are made redundant or cannot work due to illness. The financial regulator advises people to find out the cost of the loan without PPI and question whether they really need the cover.
On a fixed rate personal loan, the interest rate and the amount of the monthly repayment will stay the same throughout the term of the loan. With most variable rate loans the amount of the repayment will also stay the same. If interest rates rise, there may be an extra payment at the end, but if they fall, the number of repayments may fall.
Credit union loans tend to be more flexible than loans offered by other financial institutions. Instead of being tied into a fixed repayment over a set term, borrowers can pay extra at any time and pay off the loan early if they wish, saving on interest. The maximum annual rate that can be charged by credit unions is 12.68 per cent or 1 per cent a month.
