14.02.2023

WHAT TRAPS CONSUMER LOANS HIDE

You thought you'd be able to make it financially until your first paycheck after the bigger spending spree around the holidays, but an inaccurate budget or unexpected expenses leave you in a bind.

Offers for quick loans "float" on the TV screen, "speak" on the radio airwaves, "peek" from Internet banners, "pop" out of our mailboxes, "fly" to us in the form of flyers and brochures... However, financial consultants are unanimous – these are expensive and risky services and should only be used in emergencies.

In order not to fall into the traps of hidden fees and unfair practices of fast loan companies, do a thorough market research, calculate how much the loan will cost you, compare the currently available options and then choose the best one for you, the online platform advises "We, the users".

How to choose the right loan for you

It is important to find out how much the loan will cost you and to assess whether you will be able to repay it on time. Don't underestimate the risk that your income and status will change during the time you owe the lender.

Collect all the information about the most important conditions for the granting, utilization and maturity of the loan and compare it with that of others offered on the market. Pay particular attention to the total repayment amount, the interest rate, the APR, the term of the contract, and the amount and number of repayments. All this is contained in the so-called Standard European form, which the creditor is obliged to provide you before the conclusion of the contract, so that you can form a clear idea of what you are getting and what you will have to pay back. Sometimes companies do not provide such a form at all or some of the mandatory details are not filled in.

So that you know in advance what it should say and are prepared to require it to be completed by the lender, We the Consumers provide a sample form in advance.

Experts remind that when comparing the price of two loans, the most accurate indicator is the so-called annual percentage of costs. It includes the agreed interest rate and the fees and commissions payable.

Check the lender

Be sure to check the merchant in the official register of the Bulgarian National Bank website to make sure that it is working "in the light".

Before you sign the contract

Read the contract and its general terms and conditions carefully before signing. In the premises for customer service, accessible information in written form should be placed in a prominent place about the general conditions, tariffs and the order in which the creditor provides consumer loans. You have the right to request and receive in advance and free of charge a copy of the draft contract (unless the creditor refuses to grant you a loan).

Do not agree to illegal fees, which sometimes appear in terms of conditions. These are fees for additional services that you have not specifically requested, and the creditor forces them on you. For example, a phone call reminder when a loan installment is late. Or in case of delay - to prepare a reminder letter or notary invitation, etc. The Consumer Credit Act prohibits the collection of fees and commissions for actions related to the utilization and management of the credit.

Do not accept clauses that provide for unfounded declaration of the loan as early demandable, because they are unfair. Such, for example, are clauses according to which the creditor can declare your loan as due in advance if you delay your payment to third parties (loans or credits to other financial institutions and/or to the state) or any legal actions and procedures are initiated against you for forced debt collection by third parties (your other creditor, the state, municipality, etc.). Such a practice is illegal because it makes you dependent on something that has nothing to do with your credit agreement.

Another unfair clause relates to the demand for illegal interest. For example, already in the case of a credit that has been reasonably declared to be due in advance, the creditor may demand the interest and fees for the entire period of the contract. According to the law, you only owe those for the time you used the loan.

Keep in mind that according to the Consumer Credit Act, the annual cost percentage cannot exceed 50% of the loaned principal. Therefore, do not accept such terms.

When signing the contract

Be sure to insist on a written contract. It should contain all the information given to you in the pre-contract and specifically agreed parameters.

Be sure to pay attention to what document they present you for signature. There are cases in practice in which the company provides its client with an application, which subsequently turns into a contract, and in which some of the details, such as the amount of the loaned amount or the interest rate, remain empty. They are filled out later, in the absence of the user, but his signature is pre-written and in practice he agrees to something that he does not know what it will be.