In theory, according to Bulgarian law, the APR (annual percentage rate of charge ) of each consumer credit should not exceed 50% annually. With the เงินกู้นอกระบบ this becomes perfect now.
In practice, however, many financial companies have found clever ways to circumvent this law and increase the cost to their clients. This is done by adding to the cost of the loan items other than interest and fees. Although extremely unpleasant for consumers, they are completely legal and by “extremely unpleasant” we mean the risk of credit appreciation of up to 10,000% for some fast-loan companies (if we apply the methodology for calculating APRs for these elements). The purpose of this type of company is not to create long-term relationships with their customers, but to make short-term profits. To avoid falling prey to such an unpleasant surprise, read the following lines carefully.
Interest and fees
In the normal case, they are the basic cost of a cash loan that is included in the calculation of the APR.
- Interest is the price you have to pay for the money you owe at any time. When you make installments on the loan, the amount due, and accordingly the interest, decrease.
- Analysis fee (also known as ‘approval fee’, ‘application processing fee’, etc.) – this is usually charged at the time of the loan and is added to the amount received by the customer.
- Monthly fee – it is a fixed amount that is paid every month throughout the loan period. It does not change and does not depend on the reduction of the amount due.
Consumer loan expenses
On the day of writing, the total cost of cash loans varies from 6.5% to 50% APR (includes interest and fees only). If you want to calculate the cost of a particular loan, use our credit calculator.
Ads are not a particularly secure source of information. The APR percentages listed there are often different than the ones you will have to pay at the end. And as you will see below, there are elements of credit (other than APR) that the advertisement deliberately silences.
Term of the loan
The cost of a loan is determined by two important components: the APR and the term of the loan (the time it takes to repay the money).
The APR calculates the costs on an annual basis, respectively, the longer the loan duration, the higher the overall costs associated with it.
It is therefore advisable to repay the loan as quickly as possible. This, in turn, would mean higher contributions each month. It is in the interest of financial institutions to extend the loan term as much as possible so that they can collect more than interest, fees and insurance.
When taking consumer loans, remember that there are EU rules in place to protect you before you sign a contract and give you the option to opt-out.
Basic information for comparing offers
If you decide to buy a new product on credit, it is better to compare different offers before deciding. Before signing a contract, the lender must provide you with a standard European Consumer Credit Information. This document is designed to help you understand as closely as possible the terms and conditions of any loan agreement you may intend to sign. It includes:
- the main characteristics of the contract,
- the amount of the loan and its price,
- the annual percentage rate of charge (APR – a single value representing the total cost of the loan, including interest, commissions, fees and any other type of expenditure),
- the number, frequency and amount of all your payments,
- information on important legal aspects.
This will allow you to compare loan offers from different providers and choose the best one for you. If the lender did not provide you with this form, you can request one.