Never before have Vietnamese consumers found it so hard to get consumer loans as now. Those who have previously obtained loans are now subject to sky-high interest rates; whereas those who are in need of money meet great difficulty in accessing bank loans.
Banks not only increase interest rates to 24 – 25 percent per year, but also shorten loan terms.
Still hard to get high interest loans!
For the last two months, those in need of loans have been driven into a tight corner since many banks straight-out refuse to lend. Ms Mai, an officer in Tan Binh District, Ho Chi Minh City, needs to borrow VND350 million to buy her apartment. However “most credit officers turn down my loan application, saying that they are tightening lending,” said Mai.
Finally, she chose a foreign bank with lower interest rate than domestic ones. However, despite her income, determined sufficient to borrow such amount of money, the lending profile is not simple. After spending over a week fulfilling all the procedural requirements, Ms Mai was informed that the bank had adjusted interest rate up by 0.5 percent per month, equal to rate of 18.75 percent.
Having no other choice, she submitted VND1.8 million for fee of asset appraisal. Finishing appraisal, after another week, the credit officer informed that the bank was going to increase interest rate by another 1 percent, which meant 19.75 percent. But on top of that, the bank only approved to lend 40 percent of the apartment’s value but not 70 percent as promised. Being in the track plus regretting the appraisal fee and effort on completing procedures for two weeks, Mai reluctantly accepted and submitted another VND 800,000 for notarizing mortgage. Moreover, she also had to suffer the amount of risk insurance, paid each three years with the value equal to 0.22 percent of her loan.
Failing to access banks, Quan, a construction engineer, decided to borrow from Insurance Company P. For a personal loan, the borrower needn’t mortgage but only required documents, income proof, etc and will be approved to borrow the amount equal to 9 times higher than the income, at the interest rate of 1.39 to about 1.89 percent per month (approximately 16 -22 percent per year). Finding it acceptable, Quan borrowed VND100 million, for 48 months. However, after one week fighting against documents, Quan went to the final appraisal and was surprised to find the interest rate coming up to 29.52 percent per year, equal to 2.46 percent per month. Asking about the difference from advertisement, it was explained that this interest rate was calculated on a declining balance. The advertised interest rate was said by the officers to attract customers.
Term of loans shortened
In addition to pushing up interest rates, banks have a common tendency to prioritize short term loans.
Kim Ngan, personal banker of bank T, doesn’t hesitate to consult customers asking for personal loans that they shouldn’t borrow during this time since the interest rate is too high. The interest rate Kim Ngan informed Tuan, who planned to borrow VND 200 million, comes up to 25 percent per year, in which the interest rate accounts for 21 percent and the rest 4 percent is of risk insurance for this loan. However, since personal loans for 15 year term has been stopped, as for VND 200 million, if borrowing for three years, Tuan has to pay over VND 10 million of principle and interest per month. The suggestion is customers in need should take overdraft. This kind of loan enables customers to flexibly pay principle and interest and borrow up to VND 500 million. “As a credit officer, the more customers I attract, the more bonus I will be given. However, during this time, I have to advise customers to consider borrowing,” said Ngan.
Shortening the lending term is also the criterion of financial company like Insurance Company P, which currently only lends for up to 48 months, instead of 5 -7 years as before.
Selling house to pay interest
Not only current borrowers, but also previous ones are upset by escalating interest rate. Ms D, a newspaper journalist in Ho Chi Minh City, since Tet holiday, has been distressed with the housing loan of VND 500 million from bank T. She said that the interest rate of 13.5 percent per year at the end of 2008 has come up to 19.8 percent. Nonetheless, next month, she will be charged the rate of over 20 percent by this bank. Initially, the amount of principal and interest was rather easily paid, but now it makes her and her husband race despite a large proportion of principal paid. The amount of money they have to pay each month doesn’t gradually reduce as it should, but is even higher than that in time of large sum of principal unpaid.
Not confident of payment capacity, some customers borrowing for houses are forced to come to an unexpected solution- selling the house to pay the interest. Minh in Binh Chanh, Ho Chi Minh City, revealed borrowing VND300 million from bank Q , he is having his new house on sale to pay debt as high interest rate, together with short lending term push up the monthly-paid sum of money too high. This decision is also taken by Thanh, a magazine editor. In spite of suffering loss of nearly VND 50 million, Thanh felt lucky since his loan of VND 700 million had its interest rate increased for four times in one year, which made up a monthly interest of over VND 12 million.
DV
Vietnamese
