Did you know you can challenge your money lenders interest rate?

The key parts of a money lending contract normally are the Loaned amount, interest charged, payment period and collateral. Money lenders are generally aware that the interest rates they charge are both illegal and socially unpopular which are rates above the ceiling or the required rate as under the money lending Act.

In practice in Uganda written loan agreements often indicate the sale of items pledged as collateral. Sometimes loan contracts purport to be assistance agreements to friends in need. Other lenders ask for postdated cheques or assets to be kept in trust by the money lender.

However some registered money lenders do sign loan agreements that more or less accurately reflect the actual terms of the transaction. Although the terms of a loan are verbally communicated transparently to the borrowers who understand the amount they must pay the period of repayment and the guarantees, written loan contracts are deliberately confusing.

Rather than stating the amount of the loan and the interest to be paid , contracts usually imply that the total amount of principal plus which was lent must be repaid, with no mention of interest. These contracts are considered more easily enforceable , not only because they raise illegality or high interest rates but because socially a magistrate is more likely to be sympathetic with claims of someone who made a no interest loan to a friend , than a professional money lender charging 30% per month.

Mandated rate as under the money lending Act provides that money lenders are to have an interest on any money lent out to be 24% per annum and not above it, this thus implies a month installment of 2%. This however has not been the practice of lender in Uganda as interest goes up to 30%.
In case you feel you have been cheated by your money lender however the irregularities can be resolved by filling a case in the commercial court.


1. The court has power to recall the contract of money lending that has unfair terms.
2. The court can reopen a contract of money lending and relieve a borrower of his obligation if he or she was cheated and exploited.
3. The court can order the return of collateral sold illegally by a lender.
4. Court can determine if an interest rate has been harsh and excessive.

In the event a person feel unfairly treated in a money lending contract one can have the contract reviewed and the challenges addressed.

African proverb ; When people are asking for money they are seated when time for repayment of the loaned amount is due they stand up and shout.


  1. It’s better to use a bullet on a loan shark than going to court. You will waste more money and time for nothing. Those judges have price tags. You need to have the right connection

  2. mr. aroma patrick signed for money from me to the tune of 2,l50,000 repayable in one month at 20% extra, it is now 30months and not only failed to pay back, but has now outright refused to pay. even the collateral, he stole and disposed off. what shall i do. i still need that principal, plus interest.

  3. Its a great article but it focuses on the borrower, how about the lender? How is he supposed to charge 24% when banks charge 30 p.a and in any case, banks set their own interest rates. How is the Lender supposed to recover money if the borrower isn’t paying….and many other issues.

    1. Dear Emma, thank you for the question. We are preparing a Page on this website which will be for the benefit of the Money Lender to provide all the information and guidance a money lender may need or require regarding the legal aspects of the business.

  4. I would like to acquire a loan of about 2million to purchase a motorcycle.
    What should I do?
    What do i need?
    How much will I be paying each month for 13 months?
    What is the interest (both per annum and per month)?

  5. Is it justifiable for a money lender to ask for an interest rate of 40% per a month? There is a case where a borrower got funds from Money Lenders so as to service a loan on behalf of her 2 village mates. 1 died, the second is financially constrained. She failed to pay in the agreed period. The principal was 4.00 m and debt has now accumulated to 18.00 m. Whatever she pays is absorbed in interest. She committed her land and house as security. Please advise.

  6. I need to get a loan for opening up a fair business with ataxi but i dont have colateral, what should i do because i wanted this urgently.

    1. Depending on how much money you need, a good option could be family and friends. Since they know you and trust you they may be willing to lend you the money without collateral. Since such relationships can be difficult though, it would be important to put the loan agreement in writing so that you are compelled to pay them back and to treat it professionally.

  7. Am a youth 25 years of age have built my 3 self contained rooms but require a loan as to complete my houses so wat can i do i only have a land agreement and noo land title as of now, i require a loan to complete them thank u so much. Messages

  8. I have some debt on my credit card and personal loan and I am unable to repay as I have lost my job and having some medical issue also. Please confirm coz I am getting so many collection calls from banks where by I am facing huge mental harassment.

  9. I have been giving out loans but am operating illegally. so far i have had two clients who havent obliged. please tell me how can get everything legal and how many people can i add on my team, i want to have an organised business and can i register it at a district level

  10. A friend borrowed money from a money lender and she has failed to pay within time.. She has been taken to police.. What could be the remedy to this.. Thanks

  11. Hello team, i lend out money but not a registered company, i am having a colleague, a work mate whom i gave 500000shs two years back, signed a form and gave me a cheque, but before the maturity date, she gave 210000shs and told me not to deposit the cheque that she will clear the balance the following when she gets her salary but since then she has refused to pay any single coin, its coming to two years now if not two years, is there anything i can do?.

    NB: the total amount was supposed to be 650000shs after 30 days.

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