AZE.US
Many citizens in Azerbaijan continue to rely on bank loans, but the interest rates offered by different banks can vary significantly even for the same loan amount and repayment period.
Borrowers often complain that rates remain too high.
“Interest rates are very high. I’ve been following bank offers for more than ten years – sometimes 16%, 18%, even 25–26%. That’s a lot,” one resident said.
Others say such rates are particularly difficult for people with modest incomes.
“For those living on a minimal budget, it’s definitely expensive. For the middle class it might still be manageable, but it’s still a heavy burden,” another resident noted.
Financial experts explain that loan rates are determined by several key factors. These include the cost of financial resources for banks, the level of credit risk, the loan term, the type of loan, and the financial situation of the borrower.
According to financial analyst Ismayil Mehdiyev, banks first assess the likelihood that a loan will be repaid.
“The difference in interest rates between banks is largely linked to the cost of the resources they attract and the level of risk they face. The higher the risk of default, the higher the interest rate,” he explained.
Banks that primarily serve customers with stronger financial profiles are often able to offer lower interest rates. Meanwhile, institutions that work with riskier borrower groups tend to set higher rates.
A borrower’s credit history also plays an important role. Customers who have consistently repaid previous loans on time are more likely to receive better loan conditions.
On the other hand, borrowers with delayed payments in the past may face higher rates or difficulties obtaining new loans.
Another factor influencing loan rates is a bank’s financial policy and the cost of attracting funds. Some banks offer higher interest rates on deposits to attract customers, which can make their lending rates higher as well.
At the same time, banks trying to expand their client base sometimes launch promotional lending campaigns with lower interest rates to stay competitive.
According to market estimates, the lowest loan rates in Azerbaijan start at around 10-12% annually, while some consumer loans can reach 25-30% per year.
Experts advise borrowers to carefully compare offers from different banks before taking a loan. In addition to the interest rate, customers should also consider commissions, service fees, and other additional costs.
In some cases, loans advertised with lower interest rates can end up being more expensive due to hidden fees and extra charges.