Red loans: What the new regulations predict - Nine useful Q&As and examples

The Greek Ministry of Finance has unveiled a new legislative regulation concerning "red loans" under the Katselis law, aiming to significantly ease the burden on borrowers. The reforms, presented on June 23, 2026, introduce measures designed to lower monthly payments and reduce the overall financial strain associated with these debts.

This new regulation achieves four critical objectives. Firstly, it universally applies a decision from the Areios Pagos (Supreme Civil and Criminal Court), ensuring that no consistent borrower needs to return to court. Secondly, it substantially cuts repayment costs by calculating interest solely on the monthly installment amount, rather than the entire principal. Thirdly, it retroactively recognizes any overpaid amounts, applying them to reduce the outstanding loan balance or the number of installments. Finally, it fairly distributes the costs between banks and the Hercules Asset Management scheme, based on when funds were collected.

Borrowers stand to gain directly in two primary ways. From now on, they will pay substantially lower monthly installments, with interest calculated only for one month at a time. Furthermore, any excess amounts paid in previous years will be recognized as principal repayment. This dual benefit means borrowers will experience both a reduction in their monthly payments and a shorter overall repayment period.

To illustrate the impact, consider a borrower with an outstanding debt of 144,500 euros in January 2024. Under the previous method, their monthly payment would be 731 euros for 300 months. With the new calculation, the monthly installment drops to 483 euros, comprising 482 euros in principal repayment and only 1 euro in interest. If this borrower paid 731 euros monthly from January 2024 to June 2026 (30 months), they overpaid by approximately 7,440 euros. This amount will be deducted from their remaining installments, reducing the total number of payments from 270 to 255. Consequently, their total interest payments will decrease dramatically from an estimated 74,852 euros to just 411 euros.