According to a financial behaviour study conducted by Rahapood.ee and Norstat, Estonians consider the lender’s website and store salespeople to be the most reliable sources of financial information about loans and instalments. According to Tanel Lassik, Development Manager of Rahapood.ee, it is a worrying sign when store staff becomes a more reliable source for people than, for example, their closest relatives. 25% of respondents, or every fourth one, believe that the most reliable information about loans can be obtained from a salesperson at a store offering instalments. Friends and acquaintances are trusted by 16% of respondents, and close relatives by 14%. “It is very worrying that people do not know how to compare credit options and do not understand which solution is the most beneficial for them,” commented Tanel Lassik, Development Manager of Rahapood.ee, managed by Svea Finance AS. – For example, when it comes to installments, I don’t know of a single supplier in Estonia that would calculate interest on the remaining loan amount – the calculation is based on the entire loan amount for the entire installment period, so that the lender can make a bigger profit. So it’s safe to say that you’re more likely to get good advice from a financially savvy relative than from a seller offering installments.” According to Lassik, a loan or installment plan with interest on the entire loan amount means that the purchase of a specific product costs the customer on average 1.8 times more than if the lender charges interest on the remaining loan amount, and the interest payments decrease as the principal amount is repaid. “It’s possible that people using installments don’t even know about this difference, since it’s widely known that interest is calculated on the remaining loan amount in car leasing and mortgages, and it’s probably assumed that interest is calculated this way in all other loans,” Lassik shared his thoughts. 72% of respondents noted that the most reliable information can be obtained on the lender's website. According to Lassik, there is no need to doubt the information on websites, but a fairly high level of financial literacy is required to correctly interpret it and understand the "fine print". "Today, there is a lot of talk about investments, but not about how to reduce your expenses. To reduce the overall cost of loans, it may be reasonable to refinance them using a loan from another provider, cash coupons or other financial instruments," Lassik noted. "The state must do a lot of work in the near future to improve the financial literacy of people of working age, otherwise a significant part of the population will find itself in an even greater debt trap." Almost a third (31%) of respondents to the study noted that they consider the interest rate to be the most important factor when evaluating loan offers, which, however, does not reflect the real cost of the loan. To wisely finance your expenses with a loan, Lassik recommends familiarizing yourself with all the credit options available on the market, carefully reading the terms, monitoring the total cost of the loan, and then comparing options and choosing the most suitable solution. Read RusDelfi wherever it is convenient for you. Follow us on Facebook, Telegram, Instagram and even TikTok.
