Consumer credit means credit a lender gives to a consumer as a loan, a right to pay later, or other similar financial arrangement. Consumer credit includes credit card loans, home and student loans, and payment by instalments.
The price of consumer credit is made up of costs
The price of a loan consists of credit costs, which may include the nominal interest rate, the cost of setting up the credit, an annual fee for continuous credit, various handling fees and other service charges related to the credit relationship.
The price of the loan is usually influenced by the length of the credit period and the method of repayment. Usually a longer credit period means a more expensive loan.
The highest interest rate that may be charged for consumer credit is 20%. For other credit costs, the law sets a cap that is calculated per day (0.01% of the credit amount or credit limit) and an annual maximum of EUR 150. These limits do not apply to mortgage loans secured by immovable property or payment in instalments for purchases of vehicles, unless the contract on payment by instalments also gives you the right to withdraw cash.
If you have concluded a credit contract between 1 June 2013 and 31 August 2019, the annual percentage rate of the loan interest is limited by law. If the amount of your loan or the credit limit is less than EUR 2,000, the annual percentage rate may not be more than the reference rate plus 50 percentage points. This interest rate cap does not apply to loans of EUR 2,000 or more, or commodity-linked loans that can only be used to pay for goods or services. If the credit costs of your loan are unfair, you can demand that your costs are decreased or even removed.
The use of messaging services for which an additional fee is charged is prohibited under good lending practice in all communication related to credit marketing and the credit relationship.
It is worth comparing prices and companies
It is a good idea to compare the prices of loans. In particular, loans taken out before 1 September 2019 may be very expensive, and you should compare lenders and replace them with less expensive loans.
To help you compare loans, you can use the Standard European Consumer Credit Information Form, which you can get from the lender before you conclude a credit contract. Among other things, the form contains information on the lender, the price of the loan and other loan terms.
When you compare prices, you should pay attention to the annual percentage rate of the interest and the total costs of the loan rather than the monthly instalments. The annual percentage rate of the loan interest is a calculated figure which describes the total cost of the loan and which can be used to compare the prices charged for loans.