Responsible lending index 2021: The prices of small loans vary even a hundredfold

“The economic difficulties caused by covid have shown how important it is to have a financial reserve. In the absence of financial problems, a loan is often the only way out in the event of sudden financial problems. And you need to be careful and examine all offers in great detail. unsolvable problems, “warns David Borges, author of the People in Need Index of Responsible Lending.

However, according to him, it is almost impossible for an ordinary person to become familiar with loans. The current ranking of the index therefore examines 44 companies that offer microloans, credit cards or overdrafts.

It compares the offered loans using 15 different parameters, which include costs (how much people pay for the loan and what will cost them any delay in repayment), transparency (scope and clarity of information provided) and client friendliness (assessment of creditors’ practices before and after the loan) .

The overall ranking divides small lenders into five groups with imaginary stars. “It’s similar to hotels or restaurants – the more stars, the better the service, the more responsible the provider. For companies that do not have a single star in our ranking or received only one, we would not recommend going for a loan. cautious, three or four stars then point to a solid standard, ie basically a responsible provider, “explains David Borges.

A loan as a loan? Big mistake

In addition to the overall ranking, the authors of this year’s index also focused on examining individual types of small loans. “People don’t deal much with the differences between different types of loans and are influenced by advertising. This is a big mistake, because the differences between an online loan, a credit card and an overdraft are huge,” says Borges.

The main difference is in the price that people pay for the loan. If a person takes out a loan in the amount of 10,000 crowns, which he wants to repay as soon as possible, he usually repays only a few hundred crowns in the bank. “However, for some loans from non-banking companies, the same loan can cost more than 15 thousand crowns in a few months. The difference between the prices can be up to a hundredfold,” emphasizes David Borges.

The economic effects of the covid-19 pandemic were also reflected in the loan market. “We are pleased that a number of companies have been accommodating to debtors. Many providers have offered people in difficulty the opportunity to defer or reduce installments. We appreciate that some companies have added useful information to their websites on how to proceed in such a situation. However, the condition is that people have to communicate, and if they know that they will have problems repaying the loan, they should contact the lender as soon as possible, “adds Borges.

Responsible lending index 2021 Photo: Man in need

The authors of the index also dealt with the availability of contractual documentation (specifically model contracts and business conditions) on the websites of individual companies. While everyone already has the conditions on their websites, you would look in vain for sample contracts in 12 of the 44 companies surveyed.

“What is striking is that reputable banks also have a problem with publishing contracts. This is an age-old topic that we honestly do not understand much. On the one hand, banks are talking about the need to increase financial literacy and on the other hand they are not able to place on their websites. documents that clients should carefully read before signing, “shakes David Borges.

Responsible lending index 2021 Photo: Man in need

Banks that have not yet eliminated this problem include ČSOB, Hello bank !, Komerční banka, mBank, Moneta and Raiffeisenbank. The authors of the study were then surprised by Oberbank, which finished in 37th place in the overall ranking, despite the fact that its overdraft offer is relatively advantageous.

“This bank has a bad website, where it is difficult to find the price of a loan, a calculator, a sample contract, there is no information on how to proceed with repayment, there is no contractual conditions. It is a bank that is not open and friendly to clients. And unlike from other banks, it has a very long period of time for which receivables from the bank are barred. The standard period under the law is three years, this bank is 15 years old, “says David Borges.

Aktuálně.cz approached the management of Oberbank to respond to the evaluation: “The evaluation mixes completely disparate categories of lenders and specific products. We do not provide so-called microloans or credit cards, which are the main motive of the article. Information on our website logically they do not apply at all, “says Monika Heiserová from Oberbank.

He adds that of the mentioned products we provide only an overdraft, but only marginally and exclusively to our existing and long-known clients as a benefit to the current account used by them.

“If an overdraft is provided to a bank’s client, it is based on personal negotiations between the bank adviser and the client and under individually agreed conditions. Detailed information about these loans, let alone calculators on the website, is not logical, because they are not intended for existing non-clients. , “adds Heiser.

Aleš Janků, the head of the Association of Non-Bank Loan Providers, also commented on the current index. The association includes two poorly rated companies – CreditOn and CreditPortal. “We know that some of our companies do not perform well on this index. But we try to meet the authors of the study and accept their recommendations and try to eliminate shortcomings. But it is true that our companies provide loans to riskier clients and therefore the cost of borrowing is higher , “said Janků.

Calculators: Beware of zero fees

Another parameter examined by the index is whether companies allow loan applicants to calculate on their website how much the loan will cost.

“We take a functional loan calculator for granted. And it must be said that most companies have this tool. However, we also find those that do not offer this service or show zero fees, which only apply to the first loan. The problem is the occasional absence of representative examples , “explains Borges.

According to him, there are also companies on the market that do not sufficiently examine the ability of clients to repay. “Not everyone examines their future clients in the central register of foreclosures. When compiling the current ranking, we also came across companies that do not use any of the reputable debtor registers,” concludes David Borges.

When calculating the costs, the standard price of a model loan in the amount of CZK 10,000 payable in one month is included in the evaluation. If the company uses different prices for different clients, the price is set at two thirds of the difference between the highest and lowest interest rate.

If the company does not publish the highest interest rate, People in Need is based on an assessment of the company’s actual known contracts. The costs also include any fees for the assessment, provision or drawdown of the loan and regular fees for the administration of the loan or for maintaining the account necessary for the provision of the loan.

Costs related to non-payment of the loan are also assessed, ie the number and prices of paid reminders or other recovery costs, possible sanctions, interest on arrears, commercial interest according to the contractual conditions and also the costs of the discovery procedure.

Costs for a one-off loan in the amount of 10 thousand crowns (30 days and then three extensions, each for 30 days)

Credit Cards

Overdraft

Internet microcredit