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Consumer credit: Lenders and borrowers the proverbial two ships   2009-05-03 - VNE

Commercial banks have been trying to lure more clients to their consumer credit products, advertising competitive interest rates, high lending limits and simple formalities. However, they have also set strict conditions for the loans, thus making many clients give up.


Clients do not have to have assets for collateral, or guarantees from other institutions to be able to borrow money at Viet A Bank. The bank has promised to provide loans of up to VND200mil, and within 32 hours.


Viet A Bank has set a flexible time for paying principal and interest (12-35 months). Borrowers have to pay the interest rate of 0.75-0.82% per month, or 9-9.84% per annum. Those who have the stable incomes of VND5mil a month and higher in HCM City, and VND4mil in other areas, are eligible for loans.


However, in order to get the loans, clients have to open accounts at Viet A bank which are then blocked. If clients want to purchase something, they have to sign an ‘order for payment’ and Viet A Bank will transfer money directly to sellers.


Commercial banks recently have been trying to push up loaning, offering consumer credit with easier loaning conditions and higher limits. However, borrowers still cannot access loans, even small loans of VND10-20mil.


Binh, a staff of a fashion company, related that she gave up the idea of purchasing a new motorbike with the price of less than VND15mil after two weeks learning about consumer credit products offered by banks.


“I can earn more than VND5mil a month, i.e. I can meet the requirement in monthly income. However, I still cannot access bank loans because my salary is not paid through the lender bank. As I cannot meet the requirement, the bank only agrees to provide VND2-3mil at maximum,” she said.


At Ocean Bank, clients can borrow up to VND300mil, or a sum of money equal to 10 months of income of borrowers (without mortgaged assets). The interest rates are defined based on the values of the loans after deducting the paid sums.


However, clients complain that the bank sets overly high interest rates on the loans, 1.25% per month, or 15% per annum. People also whisper in each others’ ears that it is not easy to get loans because Ocean Bank’s staff go to clients’ homes to check their living conditions before approving loans.


HSBC Vietnam has advertised the impressive loan interest rate of 0%. However, that rate is only applied for the first month of the loan, while clients have to pay very high interest rates for subsequent months, 24% per annum.

An Binh Bank has recently announced that it will satisfy up to 90% of the demand for capital from clients who need capital to purchase houses, instead of 70% as previous applied. Clients will be able to get a grace period of up to 36 months in paying principal. The lending interest rate is 1% per month, and clients can pay within 20 years.

According to ABBank’s Personal Banking Director Dam The Thai, funding house purchases proves to be a strategic product of the bank which now accounts for 60% of total personal banking business. Thai added that in 2009, ABBank plans to push up other personal banking products like funding car purchases and funding overseas studies.

Consumer credit has become one of the key credit products at many banks with the policy on floating interest rates in this kind of credit. However, in many cases, banks and borrowers still cannot come together.


The deputy general director of a commercial bank said that consumer credit is a risky business; therefore, banks have to set strict conditions on lending to minimise risks. He said that every bank has its own principles and policies, therefore, clients should learn about the policies of different banks to find out the banks suitable to their circumstances.

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