Amendments to the Law on Fast Credit Penalty Interest


As is well known, quick loans are one of the fastest growing industries in Latvia and elsewhere in the European Union, but despite this, many creditors are forced to repay disproportionately large amounts of debt when no underlying obligations have been paid over time.

Until 2014, fast credit issuers can collect high interest on their own penalty both for their own penalty and for interest on the initial payment for the same offense. These percentages may even violate the principal amount of the loan and may increase several times after certain deadlines, which for people who are unable to repay the loan can outgrow uncontrollable credit liabilities.


Credit Penalty Interest

Credit Penalty Interest

It is precisely because of these cases that the Saeima announced on 14 February 2013 a draft law on changes in civil law that would prevent non-bank creditors from penalizing borrowers. This bill was approved at first reading and also on 4 April at second reading with minor changes. And at the final third reading, this bill came on June 20, when it was approved and will come into force on 1 January 2014.

This law amendment, which you can view here , states that from 2014 onwards, the penalty will be determined as a lump sum or a non-recurring value that will not be repeated and may not be repeated for the same contract . This amount may be increasing, but in total only 10% of the principal amount of the debt or the total amount of liabilities.

Furthermore, this bill stipulates that if a debtor has paid a part of his debt, this money is first used to pay off interest payments, then to repay the principal amount of the loan and only then to pay the penalty in order to prevent the debtor from paying the penalty, but the principal remains unchanged and penalty interest is still rising!

In general, this bill is directly targeted at non-bank credit issuers and will in some way limit them so that they can no longer impose disproportionately high interest payments that will give us, as borrowers, greater confidence that we will be able to repay those debts.

What is still to be known is that, from the entry into force of the law, all contracts will not be immediately covered by these rules and will only be imposed on new contracts, but the previous contracts themselves will have the right to apply or not to apply this practice over a period of 3 years, which will be a transitional period.


Business Loan – The mortgage to Finance the Creation of a Business


The creation of a business implies the presence of substantial financial means, which is not always the case for young entrepreneurs.

Indeed, the launch of a new SME is not only with ingenious ideas and a good profile of creator, but it is especially necessary to raise the necessary funds to pay the entrance fee, ask the intervention an expert to do a market study, build a legal file, find a place to rent or buy, invest in equipment, etc.

In the absence of own funds for personal contribution, the project promoter often finds it difficult to find suitable credit. But what about the mortgage loan to finance the creation of a business?


The mortgage loan: how does it work?

The mortgage is the solution you need for the creation of your business if you own real estate or land.

The latter will be considered as guaranteed by the bank which will grant you a loan at 50% or 80% of the value of the property, the amount of which will be determined according to the total value of the property put under mortgage, that it is act of a house, apartment or rental property that you own.

With mortgage credit, you have the opportunity to negotiate the terms of the contract by highlighting your profitable business sector and your forecasts in terms of financial results, by opting for a fixed or variable interest rate.

Although the procedure to be followed is more or less complicated with the mortgage loan intended to finance the creation of a company, it represents a reliable guarantee for the bank which will be more inclined to reduce the interest rate of the loan because it can recover his money with the sale of the property in case of non-compliance with the repayment contract.

However, as a borrower, you must provide notary fees and registration fees to the custodian when providing the guarantee, as well as the costs of release when your company has been able to repay everything.

And most importantly, you will have to ask for the consent of your spouse if you mortgage a common good to finance the launch of your business.


Other financing solutions for business creation

In addition to the mortgage loan, there are other ways to finance the creation of a business , including the business start-up loan offered by us, which gives you access to a sum of between € 2,000 and € 7,000, repayable out of 5 years and that will be used to cover the start up costs of your business.

You also have the loans of honor and other devices of help to the creators and the system of “Love money” provided by the associates or the close families.