Consumer lending rates remain high
Consumer lending rates remain high
Though finance firms are expected to provide funding for consumers and restrict unofficial credit with simple and fast procedures, rates at such firms remain high.
With a cell phone retailing at VND22.99 million at a HCMC store, a customer will pay 40% of the price in advance, or VND9.196 million.
The customer will then pay some VND1.508 million each month, including VND1.413 million in principal and interest, VND11,000 in collection fees and VND84,500 in insurance fees. The total amount a customer pays after 12 months is VND27.298 million, VND4.308 million higher than the original amount.
An employee of a finance firm explained that the rate customers need to pay monthly is equivalent to 3.33%, or nearly 40% per year. In addition, the rates of cash lending at the firm are 2.11-4.64% per month, or 25-55% per year, depending upon the lending amounts and payment durations.
The lending rates will be lower, at some 35% per year and 2.92% per month, if customers provide water and electricity bills, identity cards and household registers.
There are now 16 financial firms offering consumer lending at phone, bike and household appliances stores.
Survey data from the central bank in seven localities indicated that the common rates introduced by such firms range between 40% and 50% per year. With certain products, the rate can be as high as 85% per year.
According to the Ministry of Industry and Trade’s Vietnam Competition Authority, interest rates last year for installments at commercial rates averaged 20-25% per year, but such rates at financial firms were 55-84% per year. This is not to mention vague interest rates and fee charges at financial firms.
Employees of lending firms earlier pledged monthly rates of 1-2%, but the actual rates in contracts are over 6% per month. Complaints sent to the competition authority mostly concerned unclear information provided by financial firms.
Nguyen Quoc Hung, head of the credit department at the central bank, said that the central bank will review lending rates at finance firms and make adjustments accordingly. Also, it is important that finance firms ensure that their rates are made available to customers.
The central bank will also look into the methods of recovering loans, as practiced by finance firms.
The local newspaper quoted lawyer Truong Thanh Duc of Basico Law Firm as saying that the rates of 80% at finance companies are too high, and as high as rates from unofficial credit sources, though they receive permission to charge such rates. In case of late payments, customers are subject to to a rate of over 100% per year.
