What Are the Current Consumer Loan Rates and What Affects Them?

Consumer loans differ from other types of loans, such as mortgage or business loans, in that they are primarily issued to individuals for personal needs. These loans are usually unsecured, meaning they are not backed by collateral, which makes them riskier for banks. As a result, consumer loan interest rates tend to be higher than, for example, mortgage loans. Consumer loans also have shorter terms and more flexible conditions, making them more accessible but also a relatively expensive financial product.

According to the National Bank of Georgia’s data from January 2025, the average interest rate on consumer loans in Georgian lari (GEL) is 18.4%, which is significantly higher than the rate on foreign currency loans, which stands at 6.8%. This stark difference is mainly due to the volatility of the Georgian lari exchange rate and inflation risks, which force banks to issue loans in lari at higher interest rates to compensate for potential devaluation.

Interestingly, among lari-denominated consumer loans, those with a term of 2 to 5 years have the highest interest rate, at 19.6%. In comparison, short-term loans (up to one year) are priced at 15.4%, while loans with a term of 5 to 10 years decrease to 15.2%. Short-term loans, despite having a relatively lower rate, are less risky for banks because they are repaid quickly. Long-term loans, on the other hand, are often issued at lower rates as banks anticipate that borrowers will become more stable over time. The 2 to 5-year loans fall into a range where the cost of borrowing is still high, but the term is long enough for risks to accumulate. This period is considered riskier for banks because a borrower’s income may change, economic conditions may deteriorate, or inflation may rise.

A different scenario applies to loans issued in foreign currencies. Globally, the interest rates on US dollars and euros are much lower than those on lari, which also affects Georgia. For example, the interest rate for 2 to 5-year loans in foreign currency is only 7.9%, whereas the same period in lari is priced at 19.6%.

However, this does not mean that foreign currency loans are always more advantageous. These loans carry exchange rate risks—if a borrower earns income in lari but takes a loan in US dollars or euros, currency devaluation could increase the amount they owe. For this reason, banks often approve such loans only for borrowers who receive their income in foreign currencies.

Consumer loan interest rates depend on several key factors. First and foremost, the National Bank’s monetary policy has a major influence—if the refinancing rate is high, it becomes more expensive for banks to issue loans, which pushes interest rates higher. Inflation also plays a crucial role—when inflation is high, banks set higher interest rates to protect their profitability.

Another important factor is the state of international financial markets. When interest rates on US dollars or euros are low globally, this affects Georgia, making foreign currency loans cheaper. However, for loans in lari, the country’s internal economic stability is more influential.

Based on recent trends, if inflation decreases and the National Bank loosens its monetary policy, interest rates on lari-denominated loans could decline. However, if global interest rates on the US dollar rise, this could have an impact on Georgia as well, making foreign currency loans more expensive.