Consumer loans have slightly simplified procedures but still require a lot of proof.

The State Bank of Vietnam's new regulations open up opportunities for those needing small loans to borrow from banks with simpler procedures - Photo: PHUONG QUYEN

This new regulation is expected to attract customers who need to borrow small amounts of money, instead of turning to finance companies or illegal lenders, as banks no longer require customers to provide complex supporting documents as before. However, in reality, obtaining consumer loans from banks is not very easy.

Simpler, but not easy.

After hearing about the new regulations regarding consumer loan procedures, Mr. Tuan (Go Vap District, Ho Chi Minh City), who earns about 10 million VND per month, said he would look into the procedures to borrow about 100 million VND to renovate his house.

"I had planned to renovate my parents' house in the countryside, but I've only managed to save over 50 million VND so far. If the procedures go smoothly, I'll borrow an additional 100 million VND to have enough money for the renovations," said Tuan.

Ms. Tuyet Anh (District 12, Ho Chi Minh City) also enthusiastically shared that she really wanted to replace her motorbike, buy a high-end refrigerator, or purchase a massage chair... but she had been hesitant for a long time because she was reluctant to borrow from finance companies due to the cumbersome procedures of banks.

"My husband and I earn a decent amount, but I only dare to buy things one at a time, and only buy something else when I've saved enough. If the bank procedures were simpler, I would confidently take out a loan," said Ms. Tuyet Anh.

However, some customers who have tried to find out more have reported that obtaining a bank loan is not entirely easy. Mr. TTQ (Tay Mo, Hanoi ), who needs 80 million VND to complete apartment renovations, said he recently inquired about the procedures at two banks to borrow this amount for one year, but found it quite challenging.

According to Mr. Q., even with the new regulations, customers don't have to prove the feasibility of their loan plan, but borrowers still have to prove their ability to repay the debt and provide information about their workplace, residence, etc. Some banks even require customers to provide information about their co-borrower.

"The bank requires me to provide six months' salary statements along with my employment contract or the latest salary increase decision. In addition, I must provide photocopies of my citizen identification card, marriage certificate, and my wife's co-borrower's information including: full name, date of birth, citizen identification card, and workplace...", Mr. TTQ said, expressing concern that the loan interest rate remains at 10.5% per year, which is not cheap.

Ms. VMN (Hai Ba Trung district, Hanoi), who recently borrowed 50 million VND to buy a motorbike for her child to use for work, said that because she had to provide her citizen identification card, salary slip, etc., as required by the bank, she had to open a salary account at that same bank. Every month, the bank would automatically deduct the principal and interest from the loan.

"The bank also inquired with the car dealership about my purchase. After I received the car, the bank immediately disbursed the funds to the dealership. This shows the bank's strict procedures. It's also convenient and beneficial for the borrower," Ms. VMN recounted.

Proof of repayment plan is still required.

Mr. Dao Minh Tu, Deputy Governor of the State Bank of Vietnam, said that the issuance of Circular 12, which stipulates that loans under 100 million VND do not require a feasible business plan, aims to facilitate borrowing of small amounts. "The goal is to make it easier for borrowers, removing previously overly strict conditions to boost consumer finance," Mr. Tu said.

According to Mr. Tu, consumer credit activities in Vietnam have grown strongly in recent years, both in scale and product diversity. To date, the total outstanding loans for living expenses and consumption in Vietnam have reached 2.9 trillion VND, equivalent to 20% of the total outstanding loans in the economy .

"Removing regulations in the loan application approval process does not mean it will make the loan approval process lax, but rather to align with practical requirements and help boost consumer finance in the future," Mr. Tu emphasized.

According to Mr. Le Hoang Tung, Deputy General Director of Vietcombank , the bank has issued an internal document implementing this regulation, in which customers do not need to prove a feasible plan for using the capital for loans under 100 million VND; they only need to provide minimum information about the legitimate purpose of using the capital and their financial capacity.

"This policy serves as the basis for us to develop consumer credit products through digital channels," Mr. Tung said.

However, in an interview with Tuoi Tre newspaper, the general director of a joint-stock bank in Ho Chi Minh City stated that the fact that customers do not have to prove the feasibility of their loan does not mean they do not have to prove their repayment plan, because the unwavering principle of banks has always been that loans must ensure the ability to recover the debt.

"Based on the information provided by the customer and using various other tools, the bank will have to assess whether the customer has the ability to repay the debt. However, the procedure will be much simpler than for large loans, and several banks have already developed lending applications to boost this lending segment," this person informed.

Responding to the question of whether banks are competing with finance companies to attract small-scale customers who are hesitant to go to banks, this person said that although both offer smaller loans, banks and finance companies have their own customer segments, and banks have higher standards.

Contributing to the prevention of illegal lending.

According to Ms. Nguyen Linh Phuong, Deputy Director of the Monetary Policy Department (State Bank of Vietnam), from July 1st, for small loans not exceeding 100 million VND, customers are not required to provide a feasible plan for using the funds.

Accordingly, banks only need minimal information about the legitimate purpose of using the funds and the financial capacity of the customer before deciding to grant a loan. For these small loans, credit institutions can proactively implement measures to inspect and monitor the use of the borrowed funds.

"These are new measures aimed at accelerating the loan appraisal and disbursement process, helping customers access small loans more quickly and conveniently, thereby helping to curb illegal lending," Ms. Phuong affirmed.

A repayment plan with higher interest rates must be ensured.

Speaking to Tuoi Tre newspaper, Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Banking Association, said that in implementing Circular 12, banks will develop processes, conditions, and procedures for lending small amounts under 100 million VND with the aim of ensuring maximum convenience. With verified customer data, banks will have more information to implement lending.

However, when lending, banks must ensure debt recovery, as this is depositors' money and recovery is not easy. Therefore, although they are not required to prove a feasible use of the capital, customers must demonstrate their ability to repay the principal and interest.

This involves understanding the borrower's financial situation, such as income and sources of revenue, to ensure they have the means to repay the bank after borrowing. Additionally, the lending bank needs to know the purpose of the loan, whether it's for home renovations, purchasing a car, or buying household items.

"In short, banks don't easily lend money while still having to ensure debt recovery," Mr. Hung emphasized, adding that interest rates on unsecured consumer loans are definitely higher than those on business loans and secured loans.

Source: https://tuoitre.vn/vay-tieu-dung-bot-xiu-thu-tuc-nhung-van-phai-chung-minh-du-thu-20240801222704668.htm