Consumers Must Borrow Wisely29/12/2016 10:40
The Consumer Council of Fiji is advising consumers who intend to take personal unsecured loans from banks to be aware of the different fees and charges that can result in expensive loans. Consumers must compare fees/charges, interest rates and other costs provided by the various banks.
The advice comes after the Council revisited this survey in December 2016 by comparing disclosed fees/charges and interest rates between the six major financial institutions. The last survey was conducted in January 2014. The study looks at the establishment fees, approval fees, documentation processes, interest rates, monthly service/account maintenance fees and other requirements that banks entail for providing unsecured personal loans.
Based on a typical $3000 personal unsecured loan, the Council discovered that Bank of Baroda and Westpac offer the best deal for consumers who need quick cash for the new year. The establishment/loan approval fees by the banks range from $100 to $200 for loans amounting to $3,000. Bank of Baroda charges up to $85 for documentation fees, although it has the lowest “establishment/loan approval fee” of $75. Interestingly, Bred Bank and BSP have the highest loan establishment fees, which is $200.
Monthly Service/Account maintenance fee ranges from no fee to $10 a month. Westpac does not have any provisions for monthly service/account maintenance fee while Bank of Baroda imposes a six-monthly maintenance fee of $20. BSP is noted to charge the highest monthly account service or maintenance fee of $12.50.
Moreover, interest rates in the different banks varies from approximately 14% to 18%. Four financial institutions (HFC, ANZ, BSP and Bred Bank) charge variable interests for unsecured loans. This means that the interest rates are susceptible to change by the banks at any point in time. Thus, consumers who unknowingly sign up for variable interest rates will not have any knowledge on the interest amount they will end up paying during the term of the loan. The term of the unsecured loans are normally short and consumers may have difficulty paying up when interest rates are variable.
Westpac offers two options for unsecured loans where consumers could choose between a variable interest rate of 17% and, a fixed rate of 13.75%. Bank of Baroda, on the other hand, offers a fixed interest rate of 14.75%. With fixed interest rates, consumers are at an advantage. They should not expect change in their total loan amount during this fixed interest term.
Personal unsecured loans should be acquired for necessary needs only. The Council wishes to urges consumers to be more responsible when borrowing from the banks. Consumers should be aware that their financial status may change anytime due to loss of job, sickness, personal disasters, rise in cost of living and so forth. Consumers are also required to understand their ability to cater for their existing and new loans by calculating their debt-to-income ratio.
Meanwhile, the consumers can use the Council’s Debt Management and Credit Advisory Services for more information regarding their debt or intentions to take loans in future. This service is free and all information will be kept confidential. Consumers may further call on our National Consumer Helpline number, 155 to seek advice or to lodge their complaints.