In the case of home loans, the type of interest rate is very simple. Virtually 100% of such obligations paid by Poles because they have a variable interest rate.
The market situation looks much more interesting if we consider cash loans. There are loans with a fixed interest rate and variable-rate cash loans on the market. Sometimes these two types of cash loans can be found in the offer of one bank.
We decided to explain how lenders set a variable interest rate for their loans. As a supplement, we present a loan offer with a fixed interest rate. Holders of such obligations do not have to pay attention to the level of interest rates
Variable rates are usually based on the GFIC interest rate …
At the outset, it is worth emphasizing that all issues regarding the type of interest rate and the rules for its update should be thoroughly described in the cash loan agreement.
The general rules for granting cash loans and consumer loans also provide important information on the principles of calculating interest. After studying such general terms and conditions of the banks, it turns out that the variable interest rate on loans is constructed similarly to housing loans.
It is the sum of the variable interest rate (GFIC) and constant margin. The main difference with housing loans is that the interest rate on cash loans is sometimes updated more frequently (e.g. every month), and the loan margin is higher due to the bank’s greater risk (caused, among others, by no mortgage collateral).
Regardless of the type of cash loan interest rate (variable / fixed), its level may not exceed the maximum percentage determined on the basis of the provisions of the Civil Code.
At the beginning of March 2019, this interest rate limit was 10.00% per annum. Agreements and regulations of loans with variable interest rates contain appropriate clauses ensuring that the level of interest does not exceed the code maximum (even if the sum of GFIC + the margin is higher).
The best online cash loans with a fixed interest rate (March 2019)
A fixed-rate seems to be the best solution …
In view of current macroeconomic conditions, it seems that currently, fixed-rate cash loans are a better choice. Holders of such loans as if in a “free” get a guarantee of an unchanged installment level. Importantly, fixed-rate cash loans are not clearly “more expensive” than their counterparts based on a variable rate.
In the table above, we have presented several loan proposals with a fixed interest rate, which has less than average installments. The comparative criterion was the installment of an example loan of USD 20,000 and a repayment period of 36 months. The cheapest such loan at the beginning of March 2019 was offered by Honest Bank.
When it comes to credit promotions, GFI’s temporary offer – Good Finance is also interesting. Until May 12, 2019, this bank offers a fixed interest rate of 4.40% for loans of up to USD 30,000 and a repayment period not exceeding 60 months.
Holders of such cash loans, after fulfilling the terms of the promotion, do not pay interest for the last year. It is worth noting that a cash loan from Good Finance has a fixed interest rate regardless of the repayment period chosen by the customer.
Uncertainty awaits holders of ‘variable’ loans
People who buy loans with a variable interest rate must always be prepared for a slightly higher risk than for a fixed rate. In 2019, such people will need to follow media reports more closely than usual.
This is not only due to the fact that an increase in the GFI interest rate by raising the GFIC rate and installments of many loans is possible before the next 12 months.
It is also worth realizing that there is still confusion with the interbank GFIC rate, on which the variable interest rate of hundreds of thousands of loans (including cash) depends.
The method of calculating the aforementioned rate (reflecting the interest rate on loans granted by banks), unfortunately, does not correspond to the new EU regulations.
That is why the rules for calculating GFIC must be changed by January 1, 2020, or an appropriate indicator should be introduced in its place. If the necessary changes cannot be implemented on time, it cannot be ruled out that after 1 January 2020 variable loan interest rates depend on the GFI reference rate.