The person who takes out a consumer loan can at any moment repay it earlier than the contract stipulates. In such a case, the person can have to pay penalties. But the payment must not exceed the total value of the interest rates that remain unpaid to the financial institution. The National Bank of Moldova published information about the consumer loan as part of the information campaign carried out by it in concert with the National Commission for Financial Markets within the financial education project “Learn. Give Sense to Money”, IPN reports.

The consumer loan is an advantage provided by a financial institution for a person who does not have enough money to be able to cover the incurred costs. In the Republic of Moldova, the banks and nonbank lending organizations can release loans to private individuals depending on the individual situation of each person. Even if the consumer loans can be provided in different forms, the main elements remain the same and should be understood by each person.

The law on lending agreements intended for consumers specifies the information that should be included in any loan proposal. The nominal interest rate and other included commissions, the total value of the loan, the effective annual interest rate, the validity period of the lending agreement, the total sum that is to be paid and the value of monthly interest rates are among the key elements that must be present.

The law provides that the consumer can ask to have the lending agreement annulled within 14 days without providing explanations, but this must repay the received money plus interest.

The comparing of loan proposals before taking a decision is an important stage in choosing the most suitable product. In this regard, the effective annual interest rate is very useful as it shows in one figure all the costs of a loan, such as the interest that is to be paid, the related commissions (release, management), except for penalties for overdue payments.

Even if the consumer loan can improve the individual or family comfort, this implies particular risks that can worsen the financial situation. In time, the monthly interest rate can rise. Other events like the decline in incomes or the loss of job can affect the capacity to cope with periodic payments, including interest rates. The persons with low or unstable incomes or those with poor financial training are the most vulnerable ones and are exposed to the risk of over-indebtedness. It is thus important to attentively assess the necessity of taking out a loan and the repayment capacity. The financial system provides relevant solutions, such as insurance against possible unplanned events like unemployment, incapacity to work or pay.