Donhoe’s Investigation in Interest Cap on Loans

The Minister for Finance and Personal Expenditure and Reform, Paschal Donohoe, has begun investigating the idea of capping interest rates moneylenders can charge. The discussion of capping maximum interest rates has been brought up by the fact that moneylenders can charge insanely high percent annually on small loans. In other words, any licensed moneylender is able to set their own interest rate. There has been a recent push onto the Minister for Finance to create a interest cap on loans.

Why is the ability for licensed moneylenders to set their own interest rates an issue ? Interest rates determine the price at which individuals can borrow money. The higher the interest rate the more expensive it becomes to borrow money. The higher the cost of money the more difficult it becomes to borrow money and thus discourages investment. Ultimately, ability to set extremely high interest rates means borrowers will be paying a high price for money. The higher the interest rate set by a moneylender the higher the lenders profit will be.

In comparison most countries in the European Union …

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