Rolling loans in the light of applicable law

The phenomenon of rolling out loans, i.e. extending their repayment several times for an additional high fee, had to disappear due to the introduction of non-interest limits on the cost of loans. They were replaced by refinancing in subsidiaries of the lender

What is rolling loans?

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Even before the new provisions of the Anti-usury Act were implemented in Poland, a common practice in loan companies was the so-called rolling out loans. This involves postponing the repayment date for an additional commission. Many customers use this option when they were unable to pay their commitment on time.

The problem is that the commission charged for extending the repayment period was higher than the cost of entering into the commitment. Under the new Act, this is no longer possible in the current way, due to the introduction of a new limit of loan costs – interest and non-interest.

Limiting the cost of loans

Limiting the cost of loans

Each loan company must comply with the limits on the cost of loans regulated by the anti-loan laws. As part of non-interest costs, the lender may charge a client no more than 25 percent. the loan amount and 30% of this amount per year (part of the variable costs depends on the length of the loan period).

For example, if the loan is 1 thous. USD and is granted for a month, it will not be able to cost more than the sum of USD 250 and USD 25 – a total of USD 275. In addition, the lender can charge a maximum of 10%. interest per annum.

As part of non-interest expenses, they are also expected to match the costs associated with postponing the loan repayment date.

It is also worth emphasizing that according to the new set loan cost limits are calculated from the amount of the first loan granted to the client, but the loan company must fit in them Also in any subsequent loans granted to the same customer within the next 120 days.

Refinancing instead of rolling out loans

Refinancing instead of rolling out loans

Rolling loans still exist, although lenders do not earn as much as before. Commissions for extending the repayment deadline fell.
Another way to bypass the limits on non-interest charges and the ban on rolling out loans is to grant a loan to pay back your previous commitment.

Such refinancing is possible if the customer took out a loan in one loan company but a refinancing loan in another. At that time, there are no total cost limits for the loan, but separately for each liability.

Meanwhile, both loan providers may be dependent on each other.