The home and car loan interest rates stay at the record low for many years

21-Nov-2020 Intellasia | Tin Tuc | 6:02 AM Print This Post

Compared to the beginning of the year, mortgage interest rates at banks were then one percent to two percent lower, ranging from 5.99 percent to 11.5 percent per year. In which, the most attractive interest rate belonged to the group of foreign banks, only from 6.49 percent to 8.8 percent per year, while domestic commercial banks offered loans with prevalent interest rates from 7 percent to 11 percent per year. This preferential interest rate would be fixed for the first one year to three years, depending on the bank and preferential programmes at the time of disbursement. After the preferential period above, the rate would float, calculated by the base rate (or savings interest rate) plus 3 percent to 4%.

Specifically, Standard Chartered Bank and United Overseas Bank (UOB) were applying a preferential home loan interest rate of 6.48 percent per year, with a loan limit of up to 75 percent of the real estate value the maximum loan term of 20 years. Hong Leong Bank applied a home loan interest rate of 6.75 percent per year. The maximum loan rate was up to 80 percent of the real estate value.

For the first time, Shinhan Bank had a fixed-interest home loan package with a preferential interest rate of up to 48 months, only 8.7 percent per year. The bank’s fixed 12 months interest rate decreased from 7.5 percent per year to 6.5 percent per year.

On the side of domestic banks, Vietnam Maritime Commercial Joint Stock Bank (MSB) and Orient Commercial Joint Stock Bank (OCB) currently had the lowest preferential interest rates on the market, only 5.99 percent per year. The lending limit was up to 90%, even 100 percent of the property value, with a maximum loan term of 25 years. However, this interest rate was only fixed for a few months, after which it would float with a margin of 3.5 percent to 3.9%.

Some other banks had attractive preferential lending rates such as Vietnam Prosperity Commercial Joint Stock Bank (VPBank) at 6.9 percent per year, Vietnam Public Joint-stock Commercial Bank (PVcomBank) at 7.49 percent per year, Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) at 7.5 percent per year, Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) at 7.7 percent per year. Meanwhile, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Vietnam Export Import Commercial Joint Stock Bank (Eximbank) kept the interest rate unchanged at 11.5 percent per year, the highest in the market.

As for car loan interest, the current popular rate was about 7 percent to 9 percent per year applied in the first three months to 12 months, with the offered limit was up to 80 percent to 100 percent of the asset value. Specifically, Vietcombank was applying an interest rate of 7.7 percent per year for the first 12 months, that of VietinBank was 7.9 percent per year for the same period, that of Vietnam Bank for Agriculture and Rural Development (Agribank) was 7,9 percent per year fixed for the first 24 months.

Besides, car loan interest rates were also quite competitive at private joint-stock commercial banks. Typically at Saigon Hanoi Commercial Joint Stock Bank (SHB), car loan interest rate was 6.8 percent per year for the first six-month term; which at MSB was 6.99 percent per year; Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) ‘s was from only 8 percent per year, that of Military Commercial Joint Stock Bank (MB) was from 8.5 percent per year.

As for foreign banks, Woori Bank lent at the interest rate of 7 percent per year, applied in the first 12 months. Standard Chartered Bank applied the interest rate of 7.25 percent per year for the first 12 months. ShinhanBank loans’ interest was only 7.5 percent and above per year for the first 12 months. Hong Leong Bank lent at the interest rate of 7.55 percent per year for the first 12-month term.

Although there were significant differences in lending interest rates at banks, there were also conditions for proof of income, processing time, disbursement limit or maximum loan term. The more preferential the interest rate, the more difficult the attached conditions, the stricter the process, especially at foreign banks.

Be careful of risks

According to the retail manager of a bank in Hanoi, since the Covid-19 epidemic, banks’ risk appetite had changed. Although the capital flow was abundant, the loan review should not be loosened. In contrast, it was even tighter to ensure capital safety.

The lending interest rate was at the lowest level in many years, so most customers who bought houses and cars chose to borrow from banks. However, many customers lacked consideration of their financial capacity and repayment plan in advance. On the other hand, banks also faced difficulties with approving loans when credit records or proof that the customer’s income could not guarantee the ability to repay loans, the director shared.

Van Trung, a bank credit officer, said that when registering loan packages, in addition to the interest rate factor, customers need to pay attention and learn carefully about the time to apply the preferential interest rate, the grace period of debt (exempt from paying principal or interest or both principal and interest in a certain period), the early payment penalty fee, etc. Especially, customers also should calculate their ability to repay carefully.

Including a loan of about 300 million dong with a preferential interest rate, each month, the bank payment cost, including interest and principal, was also up to 6 million dong to 8 million dong. If only with an income of about 10 million dong per month, then the ability to repay debts was not easy, Trung advised.

On the other hand, according to Trung, some banks offered loans with a preferential loan grace period from 12 months to 24 months. However, with this incentive, most banks could only provide the principal grace, meaning that customers would be exempt from paying principal for a certain time and still have to pay interest monthly.

Although this product would help customers have a stretch to prepare the money, the actual interest to be paid to the bank would be more extensive, and the repayment period would be longer. Therefore, customers needed to carefully consider the bank’s grace period on principal or interest, or both, Trung emphasized.

Talking about this issue, Can Van Luc, Chief Economist of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), recommended that to ensure solvency, people wishing to borrow money to buy a house should accumulate about 20 percent to 30 percent of the asset value and earn a stable income of 25 million dong to 40 million dong per month or more.

Whether offering an unsecured loan or a mortgage, the borrower also had to calculate a detailed debt repayment plan to buy a house and a car while ensuring the quality of life, avoiding overdue interest penalties and bank bad debts, Luc shared.

According to experts, home loans and car purchases were still the banks’ favourite segments. Usually, the assets customer aimed for would be collateralised as collateral, so the debt risk was classified. However, in the context of many industries and sectors being seriously affected by the Covid-19 epidemic, people’s income also affected, banks needed to study carefully to understand customers’ financial needs, creating favourable conditions for borrowers but still ensuring the safety of capital.

 

Category: Finance, Vietnam

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