Borrowers complain that commercial banks have raised the interest rates of consumer loans too sharply, which has made the financial burden heavier on their shoulders.

Mai Phuong, an officer of a state agency in district 5, said that she has been losing sleep for the last few days over the 300 million dong loan she borrowed from VietBank.

In mid 2010, Phuong asked for a loan from the bank, because she needed money to repair the house and pay tuition for the son, who is studying at a foreign university. VietBank agreed to lend 300 million dong for 60 months at the interest rate of 16 percent. The credit contract signed between Phuong and the bank stipulated that the monthly interest will be calculated in the actual outstanding loans (not on principals), and that the bank has the right to adjust the interest rates every three months.

“I previously calculated that I would have to pay nearly 7 million dong a month in interest, which was within my payment ability, therefore, I accepted the loan,” Phuong said.

However, since August 2010, Phuong has been regularly receiving the notices from the bank on raising interest rates every three months. “The interest rate has climbed to 21.5 percent per annum, while the principal is now worth 256 million dong,” she complained.

Similarly, Nguyen Minh, who is working for an enterprise in HCM City, has got headaches with the loan he borrowed in June 2010. At first, Minh had to pay 9 million dong a month in both principal and interest every month. After that, since the principal has decreased, he had to pay 7 million dong.

“Recently, I was told to pay over 8 million dong a month, even though I had paid 1/3 of the total principal. Then I was told by the credit officer that the lending interest rates have increased,” he said.

“The credit contract says that the interest rates of the loans will be floating in accordance with the market interest rates. But I did not pay attention to the provision when signing the contract,” he said.

“The bank informed last month that the interest rate was 18 percent, while it has informed the 20 percent interest rate for this month,” he added.

Duc Toan, a worker of a media company in District 3 in HCM City, related that he borrowed 300 million dong from Sacombank in 2008. The initial interest rate was 13 percent per annum, but it has soared to 21.5 percent recently.

“After three years, we had paid 180 million dong in principal, while the loan has the term of five years. We luckily got a sum of money from a relative, so we decided to pay the loan before it comes due and accept fine for early payment,” he said.

According to Nguoi lao dong, banks have raised the consumer ‘s loan interest rates to 24-25 percent, in a plan to tighten credit.

“Under the credit contract, the bank has the right to adjust the interest rates every three months. My loan has the term of 60 months, i.e, it will see the interest rate to be adjusted 20 times until it becomes due. I wonder how high the interest rate will be then.” Phuong said.

Meanwhile, Nguoi lao dong has quoted an officer of a finance company in HCM City as saying “despite the exorbitant interest rates, the demand for consumer loans remains very high. The company is now offering the interest rate of 3.02 percent per month, or 36.24 percent per annum if borrowers pay in accordance with original principals. Meanwhile, the interest rate would be 4.99 percent per month, or nearly 60 percent per annum, if borrowers pay in accordance with actual principals.”

However, the above said interest rates are applied only to the company’s loyal clients. Those people, who first come to the company, will have to bear the interest rate of 5.36 percent per month, or 64 percent per annum.

Explaining the exorbitant interest rate, the company said the risk of consumer loans is very high. The bad debt ratio may be as high as 15 percent of outstanding loans.

Source: NLD