The High Cost of Borrowing in the Czech Republic

According to the Responsible Lending Index compiled by nonprofit organization Člověk v tísni, people in the Czech Republic can end up paying up to 45% more than the original amount borrowed due to interest and fees when taking out a loan of 20,000 Czech koruna with a monthly repayment term. The most expensive types of loans are microloans, which can have costs ranging between 332 and 8,995 Czech korun. However, it is not always the case that non-bank loans are less favorable than bank loans. Some loans offered by companies such as Home Credit, Cofidis, and Kamali are comparable in price to bank products.

In contrast, the cheapest loans were found to be from Česká spořitelna, Home Credit, and Cofidis, while the most expensive were those from Credit Portal, Creditgo, and Půjčka Plus. A complete list can be found on the Člověk v tísni website.

Despite the competition among loan companies to promote their loan benefits on their websites, Člověk v tísni warns that offering loan extensions, especially those at high-interest rates, can lead to problems for borrowers struggling to repay their loans. However, some companies have improved their services and offered options for borrowers to resolve issues and explain related risks. They also provide a list of information that creditors may need from borrowers in difficulty, including contact phone numbers and emails.

According to David Borges, an analyst at Člověk v tísni, offering repayment plans and solutions rather than just loan extensions is ideal as it increases the chances of repaying debt. Loan extensions are usually offered by companies with high-interest rates.

Kontokorent was the most advantageous in comparison, with monthly payments of no more than 400 Czech korun, followed by credit cards. However, credit cards have many pitfalls, such as cash withdrawals that are usually not covered by interest-free periods, and borrowers being surprised to learn that when they pay off their debts after the interest-free period, they need to pay interest not only on the overdue period but on the entire time they borrowed.

According to Borges, most people find it practically impossible to calculate the cost of the gradual repayment of credit cards. Most banks do not have a calculator on their website to calculate these costs.

In conclusion, the high cost of borrowing in the Czech Republic can be a burden for many, and it is essential to consider all options carefully and to understand the risks before taking out a loan. Borrowers should not hesitate to ask for information and help from their creditors to avoid further problems.