Usually, a loan or credit installment change is associated with currency offers – a good example are loans in Swiss franc, whose installments increased with the increase in the exchange rate of this currency. However, installments of a loan taken out in zloty may also grow. When does this happen?
If we take out a loan or a loan, we agree to a fixed installment that matches our household budget. Not all of us, however, realize that installments can change and in a short time they can increase up to 20%. How is this possible? First of all, it is about jabank in the case of loans in PLN.
What is jabank?
jabank is the reference interest rate on loans on the Polish interbank market. The interest rate is determined on the basis of the interest rate given by banks operating in Poland and belonging to the jabank panel as their arithmetic average.
jabank interest rates are the basis for setting the interest rate for loans and credits granted by Polish banks, as well as the base rate for many derivative transactions concluded on financial markets.
When does interest rates change?
It all depends on economists who are part of the Monetary Policy Council. They deal with the assessment of the state of the economy. Various factors are taken into account, including inflation, which is the main factor regulating jabank.
When there is a risk that inflation will go up, the Monetary Policy Council also raises interest rates. As a result, there is an increase in the interest rate on the loan or loan, and thus the increase in the installment. Of course, this does not always lead to increases, nevertheless, when inflation is at a high level, paying installments of loans and credits must be prepared for the installments to increase.
Change in the amount of the loan and loan installment at the client’s request
However, the change in the amount of the loan installment may not only be the result of the MPC decision, but it may also take place at the client’s request. This is particularly the case when the customer paying off the loans and credits is unable to cope with the obligations and asks the bank or loan institution to reduce the installment.
The reduction of the installment is possible in principle when the repayment period is extended at the same time. Then the same capital and fees extend and for each month there is a smaller amount to pay off. At the same time, we must remember that the costs increase – the longer the loan or loan, the more we will pay for it to the bank or loan company.
Change of foreign currency loan installment
As we mentioned at the outset, a loan or loan installment may also change if the money was borrowed in the currency.
Then the change may occur as a result of exchange rate fluctuations – when the exchange rate increases, we pay a higher installment, when it decreases, then the installment is lower. In addition, spread is affected by the spread, namely the difference between the purchase and sale price of the currency offered by the bank.