# How High Can Non-interest Loan Costs be? – Payday Loan Consolidation

Last year, the legislator regulated the non-interest costs of non-bank loans. The limits introduced allow to limit the unjustified raising of commissions and additional fees. Check how much you pay for your loan.

## What is involved in the non-interest loan costs?

Pursuant to the amendment of the Act on consumer credit, non-interest loan costs, and thus also non-bank loans, are all costs borne by the borrower in connection with the entry into force of the consumer loan agreement, bypassing interest. They include commissions charged by banks and loan companies, as well as expenses such as loan insurance. Non-interest costs are included in the APRC, ie the Real Annual Interest Rate . The APRC reflects the real expenditure related to borrowing.

## Maximum non-interest loan costs

The Act on the Supervision of the Act on Financial Market Supervision and Certain Other Acts, which entered into force in 2016, introduced a limit of maximum non-interest loan costs. How much they really carry out depends largely on how many months we took out the loan. Another important factor is the amount of the liability. We calculate the maximum costs using the formula: K xn / R x 30%, where K is the total loan amount, n is the number of days that make up the loan period, and R the number of days per year.

Using the formula introduced by the legislator, it can be easily calculated that if we borrow PLN 5,000 for 12 months, the non-interest costs will amount to PLN 1,500. The amendment introduces one more significant limit. Total expenditure not related to interest can not exceed the value of borrowed capital annually. This limitation is especially important for long – term installment loans . Even if, according to the formula, the costs would exceed the amount borrowed, no bank or loan company can collect a higher fee.

## Commission on credit and early settlement of debt

In accordance with the common position of Lukai and the Financial Ombudsman, giving the whole loan ahead of schedule, we can count on a proportional refund of all the fees we incurred. If we took a loan for 2 years and settled the liability after six months, financial institutions can not charge interest for the remaining one and a half years. However, the reduction of the total loan cost also applies to other fees – commissions, insurance expenses or administrative fees. Even if the commission was collected only once at the very beginning of the loan period, we can demand the return of its part.

Financial institutions try to argue that the commission fee does not apply to the entire loan period, however, Lukai and the Financial Ombudsman say otherwise. In disputable situations, you can count on the help of these institutions. When solving controversial situations in court, the Financial Ombudsman supports consumers of so-called important views. They are important opinions taken into account by the court when adjudicating.

## When can the cost of credit rise?

Timely repayment of the loan is very important in the context of the costs incurred. If we do not settle liabilities on time, the lender has the right to charge us with penalty interest on the loan. Their amount depends on the NBP reference rate. It should be added 5.5 percentage points to its value. The penalty interest on the loan at this point is 7%, and the maximum interest for delay can not exceed twice the statutory interest, or 14%. The loan interest rate is therefore closely related to the reference rate of the National Bank of Poland, which since 2015 has remained at the record low level of 1.5%.