The availability of goods and services, the pursuit of technological novelties, and above all, ensure from everywhere that if you want, you can have everything that makes people fall into consumer craze. They uncritically trust ads of loan companies convincing that taking a loan is a piece of cake – quickly, easily and pleasantly. Unfortunately, the repayment of such a commitment is not always equally simple and can become a source of serious financial problems.
ICAN Research report “How Poles lend” indicates that in a situation where we do not have enough money for something, we do not ask for help for the family. Although such a loan usually does not involve additional commission costs, we often feel too embarrassed to ask our relatives for help, the more so that in case of repayment problems we may lose their trust. Therefore, as many as 70% of respondents prefer to borrow money at a bank or other financial institution.
Fast money, but at what cost?
Before granting the loan, the bank verifies its potential clients quite heavily, checking their earnings, current liabilities and credit histories, which is why not everyone has a chance to get a loan. And here are the loan companies that offer quick loans without asking about earnings, the number of dependents or current liabilities. All you have to do is complete the form and the money will be transferred to the borrower’s account within 15 minutes. People with easy cash often do not read the terms of the loan agreement. And this is tragic in consequences, especially when it comes to the so-called chwilówki. When it comes to repayment, it often turns out that you have to pay several times more than you borrowed. How is this possible? Well, additional fees are added to the correct amount of the loan, such as preliminary fees, interest, payment for a consultant’s visit at home, insurance.
The total cost of the loan is represented by the APRC (Actual Annual Interest Rate). The lender is obliged to inform the client about its amount, but – as mentioned above – the client does not always pay attention to this part of the contract, and the creditor is rather in no hurry to discuss all the components of the quick loan. Often, using the naivety and ignorance of the client, he manipulates fees to increase the loan amount as much as possible (eg by inflating the interest rate).
The new anti-usury law
The revised anti-usury law, which entered into force on March 11, 2016, has somewhat curtailed the unfair actions of lenders. First of all, it reduced the costs of borrowing and additional fees. The amount of interest for granting a loan can not exceed 10% per annum, and the sum of non-interest loan costs can not be more than 55% of its value.
The act also limited the manipulation of the so-called rolling the loan, i.e., postponing the repayment date of the loan for the next period (of course, for an additional fee). From now on, roll-up fees must be significantly reduced because they are part of the non-interest cost of the loan and can not exceed the amount specified by law. What’s more, each subsequent loan granted to the client up to 120 days after the first unpaid payment is made, must (with all costs) fit into the non-interest cost of the first loan. Therefore, the lender does not pay to give the debtor the next loan to repay the previous debt. However, he can refer him to another loan company, which is “accidentally” connected with it. It is easy to conclude that loan companies use this gate en masse, creating networks of related companies.
The Act also strengthened the powers of the Polish Financial Supervision Authority, giving it the opportunity to conduct explanatory proceedings against companies that suspect illegal activity (especially with the intention of fraud). There is a fine (PLN 500,000) or imprisonment of up to two years for impediments. Still, the KNF does not have full control over loan companies, hence the situation described above often occurs – companies offering quick loans transfer the same customer in a short space of time, pulling it into additional costs, and thus – driving into a spiral of debt.
How not to be deceived?
So what should you do to avoid falling into the spiral of debt? How not to be deceived by a loan company? First of all, before applying for a loan, you should look for information about the company, which services you want to use and check its credibility. If the company proves to be trustworthy, it is necessary to read the entire contract carefully and analyze all costs included in the loan. Let us sign the commitment only if we believe that the loan is attractive and we will be able to repay it in a timely manner.