Economy/ Maximum interest rate for small consumer loans reduced

2025-02-17 21:53:00, Ekonomi CNA

The maximum interest rate (maximum NEI) for consumer loans has decreased significantly this month, following regulatory changes approved by the Bank of Albania.

For consumer loans worth up to 200 thousand, financial institutions cannot apply an effective interest rate higher than 70.9%, down from 95.19% which was the last approved rate.

The maximum effective interest rate includes the nominal interest rate, commissions applied by the lender, and all credit costs that are transferred to the customer.

According to the amendments approved this month by the Bank of Albania in the regulation "On consumer credit and mortgage credit", the maximum interest rate for consumer loans with installments up to the value of 200 thousand lek will be equal to the simple average of the effective interest rate for the loan granted in the previous 6-month period, without being increased by one third, as previously foreseen.

Part of the changes to the regulation is the addition of the obligation for the consumer to pay the commissions applied by the entities at the time of granting the consumer loan, not allowing the distribution of these costs throughout the life of the loan.

However, this change will come into effect starting in May of this year, to give financial institutions time to adapt their systems.

For loans from non-bank financial institutions, it is typical to apply very high commissions for loan administration or disbursement.

Always for amounts up to 200 thousand lekë, the maximum NEI for overdrafts (advances) has decreased slightly to 18.54%, from 18.71% in the first half of the year.

Meanwhile, for loans worth more than 200 thousand lek, the calculation method will continue to be the same, adding one third to the average of the previous 6 months, to determine the maximum NEI value.

The maximum NEI for loans from 200 thousand lek to 600 thousand lek has also undergone a significant decrease to 36.55%, from 37.43% in the first half of the year.

For overdrafts in the range of 200-600 thousand lek, the maximum NEI has been reduced to 18.5%, from 18.77% in the previous six months.

Meanwhile, for loans worth between 600,001 and 2,000,000 lek, the maximum NEI has increased significantly to 14.67%, from 12.41% in the first half of the year.

The application of a ceiling interest rate for consumer loans in Albania began at the beginning of 2022.

According to the Bank of Albania, the main reason was to protect consumers from potentially abusive interest rates, applied mainly by some non-bank financial institutions.

Since its first application, the maximum NEI has suffered a significant decline.

The first maximum NEI for small loans up to 200 thousand lek, which was set at the beginning of 2022, was at the level of 171.41%, while according to the latest publication of the Bank of Albania, this indicator has now dropped to 70.9% ./Monitor