Loan Consolidation Offers Financial Relief for Czech Households

Many households in the Czech Republic face financial strain and need to consolidate their budgets. One practical approach is consolidating multiple loans into one, providing monthly savings of hundreds to thousands of korunas.

Most banks offer Refinancing and consolidating loans, and there is significant interest from people seeking this option. For example, mBank has seen a roughly 20% increase in consolidations compared to the previous year, and other banks are experiencing similar trends.

Consolidating loans allows individuals to obtain more favorable interest rates and save on fees associated with multiple loan products. It also offers the possibility of extending the repayment period, which reduces the monthly installment, although it may result in higher overall repayment amounts.

Some banks may even offer their clients lower interest rates or forgive several loan installments. Česká spořitelna, for instance, follows this approach. “If the client makes regular repayments, we may forgive up to fifteen installments, depending on the loan amount and repayment period. This reduces the effective interest rate,” confirmed spokesperson Filip Hrubý.

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Existing and new customers continue to explore opportunities to consolidate their existing loans. By consolidating their loans, they can reduce their monthly payments and gain a better overview of their finances through a single installment, as stated by Zuzana Filipová from Moneta Money Bank.

Most banks do not limit the number of loans that can be consolidated. This applies to banks such as Česká spořitelna, Komerční banka, UniCredit Bank, and even Raiffeisenbank, where the number of obligations to be reduced is not restricted. Martina Kotasová from Raiffeisenbank explained, “We consolidate only obligations that are traceable in the registries. Usually, this is possible after the first installment.”

mBank allows customers to consolidate up to ten products into one loan, provided they have made at least four repayments. Similarly, Air Bank will enable customers to transfer up to twenty loans simultaneously, requiring at least three installments to remain outstanding or a minimum of CZK 5,000 for overdrafts and credit cards.

Loan consolidation can include various types of loans, such as consumer loans, bank, and non-bank loans, revolving loans (credit cards, overdrafts), installment loans, payday loans, or leasing. However, mortgages and loans from building societies or business loans cannot be consolidated. Banks also decline consolidation requests if any of the included loans are overdue.

Banks must assess a client’s creditworthiness before providing a loan. If a client cannot repay existing loans, it is impossible to grant additional credit, as mandated by the Consumer Credit Act, explained Petr Plocek from UniCredit Bank.

According to the overview, banks allow consolidating amounts ranging from hundreds of thousands to millions of korunas into a single loan. The repayment period is typically set at 120 months or ten years maximum.

Some banks reward their clients for prompt repayments by offering better interest rates or forgiving a few remaining installments. Air Bank, for example, provides clients with two interest rates from the beginning of the loan: an introductory rate that determines the monthly installment and a bonus rate that determines the final repayments. Clients can qualify for the bonus rate by making timely and regular payments, avoiding a delay of more than five days, or exceeding the normal installment amount by over CZK 100.