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Easy loans, high repayments
Consumers remain cautious about money lenders’ interest rates in the financial crunch period.
While domestic banks are restricting loans in a bid to battle inflation, some foreign-owned money lenders are eager to advance funds to consumers, offering simple application procedures.
But borrowers are cautious about foreign lenders’ lending rates, which are higher than domestic banks.
SG VietFinance, a subsidiary of France-based financial firm Societe Generale, is the first wholly foreign-owned lender, authorized by the central bank last year.
It provides consumers with credit to buy motorbikes, laptops and furniture, with repayment in installments.
After Societe Generale’s entry into the market, US-based GE Money and Czech’s PPF were also granted permission to operate consumer finance schemes in Vietnam.
To qualify for credit, borrowers have to prove they earn more than VND2-3 million (US$119-178) per month and are required to make initial deposits worth 20-30 percent the value of the item.
Borrowers also have to fill out an application form and provide copies of their identity card and family record book to be approved for loans.
Although the application procedure to borrow money is simple, the interest rates of these private lenders are sky-high.
SG VietFinance, for example, offers loan interest rates of 1.75 percent per month, or 21 percent per year, but borrowers have to pay an additional fee worth 7 percent of the item’s value.
Therefore, the accumulated loan interest rate actually ranges from 2.2-2.75 percent per month.
Another lender Easy Dream Ltd. provides credit at an interest rate of 2.5 percent per month.
A consumer named Thu living in Ho Chi Minh City’s District 3 said she decided against borrowing money from SG VietFinance to buy an Attila Elizabeth scooter worth VND32 million ($1,910) due to the high interest rate.
“With a salary of around VND4 million ($238) per month, the installment payment of VND2.36 million per month is too muchfor me,” Thu said.
Banks tighten consumer credit Dozens of banks launched programs at the end of last year to allow consumers to shop on credit.
DongA Bank cooperated with Saigon Nguyen Kim Trading Center, a high-tech products supermarket, to offer loans to shoppers at a zero interest rate.
Other commercial banks like Eximbank, Techcombank, Mekong Housing Bank and Habubank soon followed suit with their own consumer finance schemes.
But banks halted these programs earlier this year due to the central bank’s cap on credit growth rate at 30 percent.
DongA Bank’s General Director Tran Phuong Binh said his bank now prioritizes lending money for consumer purchases to “traditional clients” only.
Another bank director, who asked to remain anonymous, said his bank had to refuse many applications for loans to fix houses, buy motorbikes and furniture due to the central bank’s cap.
Thanhnien
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