Loan extension

In an extension the lender and the borrower agree a later due date for all or part of the debt. In short-term lending the customer usually pays a fee, and the due date moves by a set period. Customers ask for an extension when they cannot repay on time, and lenders offer it as a product or as a way to avoid default.

Polish law treats an extension as part of the cost of the original loan. Article 36a of the Consumer Credit Act sets the cap on non-interest costs (MPKK, maksymalne pozaodsetkowe koszty kredytu), and costs above it are not due. The formula and the 45% ceiling are explained in the loan institution entry.

Article 36b applies the cap to deferrals. When repayment of a consumer credit is deferred within 120 days of payout, the amount used to calculate the cap is the credit that was granted and paid out, and every cost and fee the borrower has to pay in connection with the deferral, charged within those 120 days, is added to the non-interest costs. Article 36c covers repeat loans: when the same lender or a related entity grants further loans within 120 days to a consumer who has not repaid the first one, the cap is calculated on the first loan and the non-interest costs of all those loans are added together.

Behind the extension button in the app, the system runs a process with its own states, a cost check against the cap and a change to the agreement.

The flow needs a state machine. A request can be offered, submitted, in progress, waiting for a document or a payment, accepted, canceled or rejected, and each state changes what the customer panel shows. Most bugs sit in the edge cases: a loan repaid while an extension is pending, a canceled request, and a customer who has already taken a new loan.

Eligibility should come from the loan system. The app asks whether an extension is allowed for this loan and asks again after every change, for example after a cancellation, so the offer never shows up for a loan that no longer qualifies.

The fee has to be checked against the cap. The system needs the payout date, every fee with the date it was charged and the links between loans. Within 120 days of payout it adds extension fees to the non-interest costs of the original loan, compares the total with MPKK, and refuses or reduces any fee above the cap. How the extended period counts toward the repayment period (n) in the MPKK formula is a question to settle with your lawyer before you code the rule. Version the rule and log the calculation with each extension.

The documents change too. The new due date has to appear in the agreement documents and the repayment schedule that the customer receives. If the extension is offered to a customer in arrears, Article 33 lists the minimum content of such an agreement. Under Article 30a(2) and (3), when terms change at the consumer's request, the lender may skip the 30-day notice period but still has to give the information before the change.

The cap in Articles 36a to 36c does not cover every product. Article 36d excludes credit on a consumer's current account kept by a bank, a credit institution or a credit union, and a credit card agreement where the lender is also the card issuer. A system that offers extensions on several products has to know which rules apply to each loan instead of applying one cap to all of them.

Charges for late payment have a separate cap. Under Article 33a, arrears fees and default interest together may not exceed the maximum default interest under the Civil Code, calculated on the overdue amount, and anything above that is not due. When an extension is offered to a customer who is already late, the system needs both calculations: the extension fee against the cap on non-interest costs, and the late charges against the default interest cap.

CCD2 adds EU rules on forbearance for borrowers in financial difficulty and names extending the term of the agreement as one of the measures. The CCD2 entry covers its scope and dates.

Outside the EU, the UK sets a hard limit. Under CONC 6.7.23R of the FCA Handbook a firm must not refinance high-cost short-term credit, which includes extending the repayment period, more than twice, unless it does so as forbearance.

In the app we have built for AvaFin Poland since January 2026, the loan extension is a separate flow in the customer panel. The panel shows extension offers, and the customer can request an extension, follow its progress and cancel it. Some extension types ask for a document or a guarantor's statement, which the customer attaches from the camera or from files. The app checks the status while an extension is in progress or waiting and stops when there is nothing to show. The extension rules and decisions live in AvaFin's central system, and the app follows its technical documentation.

Internal testing between July and September 2026 found the edge cases described above. The extension offer stayed visible after the loan was repaid, so the app now hides it when the latest loan is repaid but still shows it for a new loan. After a cancellation the app did not ask again whether an extension was allowed. The loan screen did not refresh its status while an extension was pending. We fixed all three.