Consumer Council of Fiji CEO Premila Kumar.
THE Consumer Council is advising consumers who intend to take personal unsecured loans from banks to be aware of a plethora of fees and charges that can make such loans very expensive.
Consumers have been advised to compare fees/charges, interest rates and others costs between various banks.
The advice comes after the Council conducted a survey of six major financial institutions inJanuary 2014. The survey looked at establishment fees, approval fees, documentation process, stamp duty, interest rates, monthly service/account maintenance fees and other requirements that consumers have to go through to acquire unsecured personal loan.
Based on a typical $3000 personal unsecured loan, the Council found Bank of Baroda and Westpac offered the best deal for consumers who needed quick cash after the festive season.
The Council found establishment/loan approval fees ranged from $100 to $200 for loans amounting to $3,000. One bank – Bank of Baroda – charges a $60 “security documentation fee”, although it had the lowest “establishment/loan approval fee” of $75. Bred Bank and BSP had the highest loan establishment fees of $200.
All banks charged $10 for stamp duty except HFC where consumers did not have to pay $10 for the stamp duty.
Monthly Service/Account maintenance fee ranged from no fee to $10 a month. Westpac did not charge monthly service/account maintenance fee while Bank of Baroda charged a six-monthly maintenance fee of $20. Once again Bred Bank and BSP changed the highest monthly account service or maintenance fee of $10.
The Council also found that interest rates varied from 14% to 17%. Four financial institutions – HFC, ANZ, BSP and Bred Bank charged a variable interest which means the interest rate are susceptible to change by the banks. Thus consumers signing up for variable interest rate will have difficulty predicting what they will end up paying during the term of the loan. The term of the unsecured loans are normally short and consumers can have difficulty paying up when interest rates are variable. Westpac and Bank of Baroda offer 14% and 14.75% interest rate respectively fixed for two years. With fixed interest rate consumers should not expect change in their total loan amount during this fixed interest term.
While the Council understands unsecured personal loan is a way for consumers to excess some financial resources, we are however urging greater consumer responsibility. It is a common knowledge that a large majority of bank customers in Fiji fail to do bank shopping. Instead, they continue being a loyal customer of a bank that provided its services to their parents or grandparents without considering which bank is giving better financial products at an affordable rate.
Personal unsecured loans should be acquired for necessary needs and not for wants. Consumers should be aware that their financial status can change due to various reasons such as loss of job, sickness, personal disasters, rise in cost of living and so forth.
Meanwhile, the Council is advising consumers that its debt management and credit advisory services are available for consumers who need more information or are seeking assistance regarding their debt or intending to take loan. This service is free and all information will be kept confidential.