The anti-usury act has been in force in Poland for several years, which limits the amount of interest charged in the case of a loan or credit agreement. Today, the maximum remuneration for borrowed capital may not exceed 16 percent. per year. This does not mean, however, that the most expensive cash loan carries only such a cost.
Loan companies are most often accused of bypassing the anti-usury law. Most of them charge the borrower with additional costs, and interest is not the most important component of the total cost of the loan. The statement of the actual annual interest rate (APRC) of short-term loans available on the Polish, increasingly competitive, non-banking market can be particularly impressive.
A similar strategy is also used by banks which tempt with low interest rates in advertisements. Behind seemingly attractive conditions, however, often hides a set of additional items in the price list. Among them, commissions occupy an important place, often representing a few percent of the borrowed amount. After changes to the Consumer Credit Act made two years ago, there is no longer a 5% limit on additional fees. By maneuvering this indicator, it is possible to shape the price of borrowed money almost freely.
Costs hidden in the shade
Cash loans offered by banks usually have interest rates close to the maximum allowed by law. Some institutions boast attractive rates, but the average customer will usually receive an offer close to the upper limit of the price range limits. You can find out what the bank’s pricing strategy looks like in practice, paying more attention to a representative example placed in small print in advertisements. There we will see what rates the bank uses in most contracts signed.
In a situation where interest rates in many banks are similar, commissions and insurance come to the fore. However, while insurance may be an optional item, commissions are usually unavoidable. Its impact on the final cost of credit is not trivial at all.
A few hundred zlotys of supplement
Let’s assume that we borrow 10,000 PLN per year. The interest rate is 16 percent, which is what Polish law allows. If the bank does not charge a commission, we will refund a total of PLN 11,600 after 12 months. You will still have to pay a 5% commission, i.e. another PLN 500.
The sum of loan costs for individual commission rates (PLN 10,000, loan period of 12 months, nominal interest rate of 16%, one-off repayment)
Some commission-collecting banks offer clients to incur liabilities in an amount including the fee charged in advance. In this way, the commission is added to the loan amount and interest is also charged on it. Seemingly it is not much, but such a procedure for a 5% commission in the example described increases the cost of the loan by an additional PLN 80.
The total cost counts
When comparing the terms of cash loans proposed by banks, pay special attention to the total cost of the loan, i.e. the amount we will have to pay back. The interest rate displayed in advertisements is only a facade, a lure intended to draw the customer’s attention. Today, additional fees play an equally important role, which often determine whether a given offer is even worth considering.