A new survey has revealed that many Czech borrowers lack the financial literacy needed to avoid debt traps, particularly when dealing with non-bank lenders. The study, conducted among 700 low-income households with net incomes below CZK 17,000 per person, found that almost half of respondents had turned to short-term loans and many struggled to fully understand their costs. While most participants were aware that high interest rates pose risks, only 39% understood the concept of the annual percentage rate (APR), a key measure of borrowing costs. Just over 40% recognised the term “debt spiral.” This limited knowledge leaves households vulnerable to hidden fees and unfavourable repayment terms. Despite these shortcomings, almost half of those surveyed said they could imagine taking out another loan, often citing fast approval or the ability to borrow small sums. Close to half also reported repayment difficulties, including using new loans to cover older ones, penalties for late payments, or facing enforcement action. Vladimír Rajf of Krejčí, Rajf & Partners, a law firm working with the NeplatUroky.cz initiative, said many clients only seek legal help once debts have escalated. “Most clients come to us only when the situation is critical. They often have no idea that the contract contains hidden fees or that the interest rate violates the law,” he noted, adding that many cases can be resolved before reaching the state’s Financial Arbiter. Broader research confirms these findings. The European Commission’s 2023 Financial Literacy Scoreboard placed the Czech Republic below the EU average, with only about one-third of adults correctly understanding how borrowing costs accumulate. The Czech National Bank (CNB) has also warned that households with limited financial knowledge are more likely to rely on non-bank lenders under disadvantageous terms, increasing the risk of long-term indebtedness. The Ministry of Finance has called for stronger education programmes targeting vulnerable groups, arguing that improving awareness of repayment costs and savings strategies is essential to reduce over-indebtedness. Despite widespread recognition of the risks, many households remain without financial reserves. Less than half of those surveyed said they regularly saved money, and only a minority kept track of income and expenses. Experts caution that without improvements in financial literacy, the number of families facing debt spirals is likely to grow, placing further strain on courts and social services.