What Should You Know About Installment and Payday Loans?

Minimization of bank lending risks should be carried out by banks themselves through the use of active methods of influencing the probability of non-repayment of loans and interest on them in the direction of reducing and improving internal credit risk management. It should be noted that “overdue bank loans” as defined by the NBU do not include restructured and extended loans, so the actual level of problem debt.

The decrease in 2020 was mainly due to the clearing of loan portfolios from bad debts due to its write-off. This was due to the adoption by the NBU of a resolution on banks to reimburse bad debts from reserves, which in turn helped to reduce the level of overdue debts by strengthening the requirements for borrowers and banks’ attention to risk assessment.

There are differences between installment and payday loans. Payday loans for the people are issued for a short period of time, in rare cases, it exceeds 1 year. More often, these payday loans are usually taken for a couple of weeks. There are contractual and hidden elements of the cost of the loan. Contractual, due to the agreement of the cost of the loan, are divided into basic and additional. The main elements of the cost of the loan include the amounts that the debtor pays directly to the creditor, interest, the cost of registration of the commission. 

The hidden elements of the cost of the loan include other costs associated with obtaining and using the loan and are not mentioned in the agreement. Among them – inflated prices of goods on branded loans; compulsory deposits in the prescribed amount from the loan; the requirement to insure a loan in a certain insurance company, which is associated with the bank; overstatement by the bank of the commission for collection of commodity documents, etc.