Due to Lack of Information Students Overpay up to 2000 Lats on their Study Loans

Nordea has undergone a survey to establish whether students are informed about the possibilities of changing the credit institution for repayment of their study loan, in case the terms of the current bank are not satisfactory any more. The results of the survey demonstrate that the majority or 82% of students are not informed about such possibility what could also account for a material reduction of the monthly loan repayment amount.

A study loan, likewise any other loan can be refinanced to another bank. The main reasons behind changing the credit institution are different loan costs and repayment terms. By comparing the offered study loans and the current costs thereof in various banks, it is obvious, that the repayable amount can vary between several thousand of Lats. For example, if the study loan is 3000 Lats with the maturity of 13 years, the total amount to be repaid by the client to the bank (principal amount + interest) can range from 3822 even up to 5771 Lats. In case the customers are not advised on loan terms and refinancing possibilities, they can "overpay" almost 2000 Lats.

The conducted survey also shows that 73% of students have not compared the offers of the banks: loan repayment terms, interest rates and currency that affect the total costs of the loan.

Antra Bergmane, Nordea Member of the Board and Deputy Head of Retail: „When applying for a study loan, young people frequently chose the bank in which they have their current account or which is used by their parents. When starting to repay the loan, the student comes to realize that some fellow student is paying half that much. Students are convinced that one cannot change anything about it. However, it is not the case. Any borrower, students including, has the rights to change the credit institution. Having compared the offers of various banks, the student can refinance his/her loan to a bank offering more favorable terms and continue to pay less. This offer could be also attractive for graduates who have already started to repay the study loan.”

As for today, the study loan interest rate in different banks both in Lats and also Euro may differ by almost 10%. Currently the most favorable study loans are offered by Nordea in Lats with the total interest rate of 3.9% meanwhile in other banks the interest rate for loans in Lats amounts even up to 11.9%. Besides, the interest rates for loans in Euro also differ – the rate offered by Nordea is 6.4% - in other banks it is 9.5% and even 13.0%.

For example, by assuming that the interest rate will remain fixed and that the loan has been taken at Nordea, at maturity of a study loan in the amount of 3000 Lats with the maturity of 13 years (whereof 3 are spent studying at the university) and interest rate of 3.8% the student will have to repay the total amount of 3822 Lats. However, if the interest rate offered by the bank is thrice that high – 10.6% the amount to be repaid for an equal loan will be 5310 Lats. Whereas, in case the loan is in Euro currency - 3000 Lats* with the maturity of 13 years (whereof 3 are spent studying at the university) upon maturity of the loan the student will repay Nordea 4355 Lats*, meanwhile in another bank - 5771 Lats*.

*The amount of the loan has been expressed in Lats, to make loan payments in LVL and EUR comparable.

An example:

The table below demonstrates comparison of study loan interest rates in LVL and EUR in three different credit institutions as to 17 February 2010:

The table outlines the amounts paid by the student upon maturity of a loan in the amount of LVL 3000 with the maturity of 13 years (3 from them are spent studying at the educational establishment), in different credit institutions.

*Amount of the loan expressed in Lats

To transfer your study loan to Nordea, please contact any Nordea Customer Service Unit by clarifying the balance of the study loan in the current bank beforehand. Information about refinancing possibilities can also be obtained by calling 67096096 or visiting the webpage of Nordea.