Ukrainians are massively taking out loans at a million percent per annum and don’t even realize it: anti-rating of MFOs

Ukrainians issue 650 thousand microloans every month; more than three million people have borrowed money from microfinance organizations (MFOs). Such companies claim that they provide debt at 0.01%, although the real annual rate reaches more than a million percent per annum. OBOZREVATEL collected an anti-rating of the most expensive loans from microfinance organizations, and also figured out what conditions are actually offered to Ukrainians.

How much does a loan actually cost? TOP most expensive companies

We studied the lending conditions of two dozen of the most popular companies. The vast majority of them comply with the provisions of the Law “On Consumer Lending” and indicate the real annual interest rate on their website. This is the percentage that you will have to pay, taking into account all possible penalties, commissions, and penalties.

Who has the most expensive loans:

• Аlexcredit – 1,783,266%
• Mycredit – 820 650%
• E-groshi – 515,749.24%
• Сreditkasa – 279 354%
• Selfiecredit – 203,406.11%
• Сreditplus – 115,757.37%
• Money4you – 87,838%
• Сredit7 – 60 103.46%
• Miloan – 23,625%
• Moneyveo – 12,466.25%.

Most companies “hide” these numbers in the “footer” of their sites (the very bottom of the pages), some place them in separate sections. We were unable to independently find information about the real interest rate of Alexcredit. Then we turned to a chatbot. It took the Alexcredit chatbot operator several hours to figure out what the real interest rate is. At first, the operator Liliya offered to study the site on her own, then she argued that there was no difference between the real and annual interest rates.

Alexcredit employee Lilia stated that the real interest rate is 1038%. But after calling the company’s hotline and arguing with Lilia, we managed to get information. When applying for a microloan, the maximum rate that the client will have to pay is 1,783,266% (1 million 783 thousand 266 percent per annum). This is an absolute record among all companies.

Thus, the company was in first place in terms of the maximum rate. With a large lag and with indicators two times lower is the company Mycredit. Their maximum effective annual rate is 820,650%. See the list for more details.

For comparison: if you use a PrivatBank credit card and violate the grace period, the real annual rate will be 51.76%. This is hundreds and in some cases thousands of times less than what microfinance organizations offer. But if the bank is obliged to check the client, make sure of his solvency, check the credit rating and only after that provide a credit limit, then in the case of an MFO, money can be received online and in a matter of minutes.

Why and in what cases do you have to overpay significantly?

In Ukraine, almost all microfinance organizations offer preferential loans if this is the first debt. The rate is offered at 0.01% per day. But from the second loan the rate will increase hundreds of times. The loan is provided for a period of up to 30 days. However, if this period is overdue, the amount of debt will increase every day. As a result, within a year, even with a small debt, you can end up in a debt trap.

As lawyers say, microfinance organizations rarely go to court to collect debts. Judging by the register of court decisions, Alexcredit, bypassing the court, is trying to collect debts through a notarial writ of execution. For example, many such inscriptions for “Alexcredit” were designed by Zhytomyr notary Oleg Gorai. Lawyers who defend the interests of debtors even recorded a separate video about this notary on social networks. Now debtors in the courts are canceling Gorai's inscriptions.

For example, the Zhovtnevyi District Court in Dnieper a few weeks ago, in August 2023, canceled one of the notary Goray’s inscriptions in favor of “Alekscredit”. Because of him, enforcement proceedings began, as a result of which 25.9 thousand UAH were to be taken away from the client, who borrowed 12 thousand UAH. However, the court decided to cancel the inscription. By the way, enforcement proceedings enable the bailiff to block all Ukrainian bank accounts and enter the debtor into the register. Microloans are designed for a short period. The money should be returned within a week to a month. Ukrainians who agree to borrow money at such interest rates must understand that a delay in payment will inevitably lead to a sharp increase in the amount of debt.

Read about how to protect your rights if you find yourself in a debt trap and what interest rates banks offer on consumer loans.