Risks to the consumer in a credit relationship

Published: 21/4/2016

A larger supply of kuna loans and fixed interest rates has contributed to a larger supply of credit products and greater possibilities for the consumers, prompting the need for a transparent presentation and comparison of the risks to consumers arising from borrowing in the form of different types of loans, to facilitate for the consumer the selection of an adequate credit product.  To respond to consumer queries, the Croatian National Bank has prepared an overview of the key, recognised risks associated with financial products, with a particular emphasis on currency and interest rate risks.  The concepts important for the understanding of these risks and some of the possibilities for the protection against such risks are described in the text.  It is impossible to fully avoid the risks associated with loans and other financial products but it is possible to reduce their impact on personal finances and life of consumers. Each financial product is unique and carries specific risks and some of these risks may appear for the first time and in an unexpected manner. Different loans carry different risks, which mainly depend on the currency, maturity and interest rate variability.

It is important to note that the consumer, i.e. loan user, is best placed to estimate the risk associated with the credit transaction he/she is entering into because he/she has the biggest amount of information.

In general, kuna loans with a fixed interest rate are the least risky for the consumer, but this does not mean that such loans will also be the most favourable for the consumer.