FINANCIAL AUDIT
What we check before you sign a loan: a borrower protection guide
· 6 min read · Georgios F. Dionysiou
Pre-loan audit is the most underrated service. Most borrowers sign without reading the general terms, without knowing what the Law 128/1975 levy is, and without having calculated the real cost of borrowing.
Law 128/1975 levy — the hidden tax
The Law 128/1975 levy (known as 'Law 128 contribution') is imposed on loans, credit cards and credit facilities. It's calculated as a percentage of the granted amount and paid at disbursement. Many borrowers haven't included it in their real cost calculation.
Although the rate has decreased over the years, it remains a cost added to the loan and increases the total debt from day one.
Compound interest — the calculation that matters
The most common discrepancy: default compounding, which is calculated differently from regular compounding and can lead to increased claims in case of delay.
- Compound interest is the addition of interest to principal, so subsequent interest is calculated on the new (larger) principal.
- The compounding frequency (monthly, quarterly, annual) dramatically affects the final cost.
- The law sets limits on compounding, but exceptions exist and bank calculations may differ from the legally correct ones.
Default interest rate — what's fair
The default interest rate is the increased rate applied when the borrower is late. It cannot be unlimited — courts have ruled it cannot exceed the regular rate by a disproportionate margin, otherwise it's considered an abusive term.
If the default rate in your contract is disproportionately high, it may be challengeable.
What we check before signing
- Contract and general terms: explicit analysis for abusive terms.
- Annual Percentage Rate of Charge (APRC): not just the nominal rate.
- Law 128/1975 levy and other costs (stamp duty, brokerage, insurance).
- Compounding frequency and method.
- Default interest rate and conditions for its imposition.
- Early repayment terms and any penalties.
- Mandatory insurance and their costs.
Why it's valuable before, not after
A pre-audit can reveal that the loan costs 15–25% more than the annual interest rate suggests. If you know the real cost, you can negotiate better terms before signing — or choose an alternative.
After signing, the audit remains useful (for potential term challenges), but it can't undo the contract. Before, however, it can save you from a 20- or 30-year commitment on bad terms.
Sources & legislation
Disclaimer — this article is for informational purposes only and does not constitute, nor can it replace, personalized legal, financial or tax advice. The legislation, ministerial decisions, amounts and criteria mentioned may have been amended or repealed after the date of publication; all information must be verified against current provisions (Official Gazette, gov.gr) at the time you make a decision. The outcome of each case depends on its specific factual and legal circumstances, the fund or authority involved, and the applicable provisions at the time. Before deciding or acting on any point in this text, seek a personal assessment from a qualified professional who will examine your own case.