Personal loans to see second year of single-digit growth

Non-performing personal loans in the banking system have risen since the end of last year, and the overall level is now 5 per cent. For non-banks, the NPL (non-performing loan) rate in this category is 4.8 per cent, also an increase.

Krungthai Card (KTC) is weathering the storm relatively well, as its NPL rate is only 1.1 per cent, said Sudaporn Janwatanagool, executive vice president for personal loans.

She said that because of the economic slowdown and lower purchasing power, personal loans in the financial system in the first five months expanded by only 4.1 per cent to Bt315.50 billion year on year. For non-banks, the growth was 6.2 per cent, and 2.5 per cent in the banking system.

KTC witnessed growth in outstanding loans of 6.1 per cent to Bt16.65 billion year on year.

The current drought has increased pressure on consumers in the agricultural sector, so the overall level of household debt has been unable to improve, and 2015 will be another year of single-digit growth for the personal-loan industry.

Last year, the industry witnessed single-digit growth for the first time in several years because of the political unrest that affected consumer confidence.

This year, while the political situation has stabilised for now, the global economic slowdown has hit Thais gross domestic product. This together with the high household debt has encouraged several financial institutions to be more cautious on approvals for personal loans. At the same time, people have been more cautious with their spending.

The approval rate for personal loans among banks has decreased from an average of 50 per cent to 30-40 per cent.

At KTC, the approval rate is 30 per cent. Sudaporn said the company had acquired 58,000 new customers in the first half of the year, lower than the target of 64,000.

For the full year, it targets 146,000 new customers and 15-per-cent growth in outstanding loans to Bt18.9 billion.

At present, KTC has a customer base in the personal-loan business of 710,000.

Adisorn Sermchaiwong, senior executive vice president of CIMB Thai Bank, said it had shifted focus to customers who have monthly income of Bt20,000 by offering loans at 18-per-cent interest per annum, down from the normal 28 per cent. But customers opting for such loans must repay all debt with the bank within three years.

Since it started the programme, the rate of new NPLs has improved, he said. For personal loans, the NPL rate at CIMBT is 4 per cent, and the bank is attempting to keep the rate at no more than 4.5 per cent by the end of this year.

He said monthly applications for personal loans had dropped this year because low-income people have recognised that they dont have sufficient ability to pay debt.

CIMBT does not expect new personal loans this year to reach the target of Bt10 billion, and now believes the actual figure will be between Bt6 billion and Bt7 billion.

Beware as banks offer $80K loans

MONEYSAVER HQ: How to holiday without blowing the budget

And some customers are told by the enticing marketing they will receive “same-day access to funds for approved customers.”

Banks are trying to lure customers into signing up to personal loans to pay for things including home renovations or lavish holidays.

The latest luring marketing paraphernalia uses tactics that waive loan establishment fees worth hundreds of dollars and gives customers discounted variable rates on personal loans.

But Australians#x2019; conservative nature around debt continues and strict rules now prevent banks from offering customers credit limit increases unless they #x201C;opt-in#x201D; to receive these deals.

This has resulted in institutions having to look to other ways to get customers to sign up to more debt.

Mozo spokeswoman Caroline Thomas said these types of offers aren#x2019;t #x201C;necessarily in the customers#x2019; best interests.#x201D;

#x201C;Paying off a personal loan of 50,000 or more would mean huge monthly repayments, given terms for personal loans are up to five to seven years,#x2019;#x2019; she said.

#x201C;Like with any form of credit, people need to think about their own personal situation and the time in which they can, realistically, pay it off.#x201D;

The Australian Bankers#x2019; Association’s chief executive officer Steven Munchenberg said there was no strict ruling around banks’ offering customers personal loans, as opposed to credit cards.

No strict rules … Australian Bankers Association chief executive Steven Munchenberg said banks offering customers personal loans deal was part of their marketing campaign.

#x201C;It#x2019;s a form of tailored marketing,#x2019;#x2019; he said.

#x201C;If you are interested we have very strict guidelines and we can#x2019;t give you the product we#x2019;ve offered you unless we can satisfy our responsible lending obligation.

#x201C;A bank can offer you a credit card as a new product at any time but what they can#x2019;t do if is you have a credit card is offer you an increase to your credit limit unless you opt-in.#x201D;

Data from comparison website Mozo shows the average interest rate on a 10,000 personal loan is about 12.7 per cent.

The average credit card interest rate is about 17.6 per cent.

No-bank lender raises $75MM equity; loans top $1B

Marlette Funding LLC, the Wilmington, Del. company that arranges Best Egg-brand unsecured personal loans, says it has raised $75 million in equity funding from investors led by Invus Group, New York, and from publicly-traded Navient, the Wilmington-based Sallie Mae student-loan-collection spin-off, to accelerate growth, further its partnership agenda and begin booking loans on its own balance sheet instead of just through partners.

Marlette says it has made loans totalling more than $1 billion since early 2014, and expects to raise $450 million from banks and other lenders to finance more loans.Marlette is an emerging star in this multibillion-dollar, online lending market, said Invus partner Ben Tsai in a statement. The company employs 70, and plans to add 30 by year end, says spokeswoman Alison Guzzio.

Farmer suicides in Karnataka – The Hindu

Krishna, 32, a farmer in Singamaranahalli, about 30 km from Hunsur in Mysuru district, consumed pesticide and died in the first week of June. The sesame farmer with three acres of land could not survive the debt trap he was in. He had defaulted on repayment to a local cooperative bank, fallen into the clutches of moneylenders, the water table had dropped, and his borewells had run dry. Having lost all hope of repaying the loans, he decided to end it all.

In the last fortnight alone, 50 farmers have committed suicide in Karnataka. The State Agriculture Minister Krishna Byre Gowda admits it is alarming. What is puzzling is that cases of farmer suicides had actually dropped over the last two years and have now suddenly begun to increase from mid-June onwards.

The suicides point to two things: first, a serious agrarian crisis shaped by an increase in cultivation costs and a decline in agricultural income, which is pushing farmers into a debt trap; and second, the sociological pressures that farmers face because of the disparity between their income and those in urban areas.

Vivek Cariappa is an organic farmer from Mysuru. He talks of the insecurity among farmers because neither the State nor institutional mechanisms have been able to address the crisis.

It is difficult to get crop loans, he says, but loans for consumption goods like cars, or personal loans for weddings and festivals are easily available. It is the surest way to push farmers into debt.

In Panakanahalli in Mandya district, Mahesh took a loan for his sister’s marriage. In Kestur village of Chamarajanagar district, Nanjundaiah borrowed Rs. 30,000 from a bank and Rs. 4 lakh from moneylenders to get his daughters married. Both farmers were unable to repay the loans and committed suicide.

The problem is also sociological: Farmers who aspire to the lifestyle of salaried persons end up taking loans, sometimes at 60-80 per cent interest rates, and become prey to loan sharks.

Lendmark opens Gadsden office

Lendmark provides a variety of financial services including personal loans, automobile loans, debt consolidation loans and merchant retail sales financing services. Office hours are 8:30 am to 5:30 pm Monday through Friday.

Headquartered in Covington, Ga., Lendmark has more than 150 branch locations throughout Georgia, Tennessee, Virginia, Maryland, Florida, North Carolina, South Carolina, Kentucky, West Virginia, Delaware, Alabama and Pennsylvania.

For more information, contact the corporate office at 678-625-6571 or visit the company website at www.lendmarkfinancial.com.

Interest rates on personal loans fall to lowest levels on record

Interest rates on personal loans have dropped to the lowest levels on record in the latest evidence that the cost of borrowing is continuing to fall for consumers.

While mortgage rates slumped to record levels in May when the Co-operative Bank launched a two-year rate at 1.09%, the Bank of England said rates on personal loans had also reached the lowest levels since records began 20 years ago. A pound;10,000 loan costs just above 4%.

The Bank’s credit conditions survey for the second quarter of the year found mortgage rates, which are already at historically low levels, fell slightly lower while unsecured lending rose to levels last reached 10 years ago.

Related: Interest rates rise could derail recovery, Bank of England economist warns

The survey found credit card issuers were also relaxing lending conditions by lengthening interest rate-free periods to borrowers.

It said: “Quoted rates on some personal loans also continued to fall, with the quoted rate on a pound;10,000 loan at its lowest since the start of the series in 1995.”

The Bank of England said: “The quoted rate on credit cards was broadly similar in Q2 compared to that in the previous quarter. Respondents to the survey reported that although spreads on credit card lending were unchanged, the length of interest-free periods available on balance transfers and new purchases increased.”

While there has been no change to the Bank’s 0.5% interest rate since March 2009, Threadneedle Street pointed to increased competition among lenders for the recent fall in borrowing rates and rise in consumer confidence. Lending rates are being lowered at a time when economists are urging caution to borrowers amid expectations that the Bank cannot maintain the current low rates for ever.

Low loan rates. Photograph: Bank of England

Howard Archer, the chief UK and European economist at IHS Global Insight, said: “Low interest rates are also helping consumers, but they need to allow for the fact that they will not stay down at current levels for ever and will likely start to edge up early on in 2016. Indeed, if earnings growth picks up markedly over the coming months (there has been recent clear improvement), it is not inconceivable that interest rates could rise late on this year.

“High consumer confidence means that people have become more prepared to borrow in recent months, but there could be concern that consumers will become increasingly tempted to take on debt again to fund spending.”

The Bank said that while mortgage rates continued to “drift downwards in recent months, and remained at historically low levels”, lenders did not expect rates to fall much further. However, there was scope for more products to be launched requiring smaller deposits and lenders were also loosening their lending criteria.

It found demand for mortgages increased in the second quarter of 2015 – having fallen for the previous nine months – with rises in demand for both prime and buy-to-let mortgages.

SMEs forced to use credit cards, personal loans for finance: Small Business …

 

Access to finance is still a significant barrier for Australian small businesses, with entrepreneurs increasingly turning to credit cards, family and personal loans to fund their ventures.

The barriers are outlined by Australian Small Business Commissioner Mark Brennan in his submission to the Productivity Commission’s draft report on Business Set Up Transfer and Closure, which was released in May.

The report forms part of the commission’s ongoing inquiry into the barriers involved in setting up, closing or transferring businesses in Australia, launched by the federal government in November last year.

In his latest submission, Brennan challenges conclusions in the draft report that suggest difficulties accessing finance generally was not widespread or a major barrier to most businesses in Australia.

“However, it is the experience of my office that access to finance is still an issue for some small businesses, especially start-ups,” Brennan told the commission.

“My office is regularly informed by small businesses that businesses need to borrow against personal assets (such as the family home) and from family members and friends.”

“Indeed, the draft report recognises that new businesses rely more heavily on personal credit cards, personal secured bank loans and other personal finance due to reliance on the presence of collateral by lending institutions.”

Brennan argues such businesses are failing to get approvals for business finance from traditional commercial sources due to the “risk-adverse” nature of these institutions.

“Non-traditional forms of lending such as peer-to-peer lending or crowd-sourced funding are still in their infancy in Australia and can be difficult for small businesses to access as they are generally more commonly aimed at tech start-ups or innovative businesses,” Brennan says.

“These factors mean that small businesses are drawn to personal borrowing.”

Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany he agrees with Brennan’s submission.

Strong says small businesses looking to grow often can’t access the finance they need and for those that do secure business loans, this often means two things: higher interest rates and red tape.

“When we have our council meetings, every time people say it’s wrong the way it works,” Strong says.

“Sometimes you can start up with next to nothing but other times… you need money to do it.”

“I agree with Mark, the process for doing that is too convoluted and confusing, we need to come up with easier ways to get information about business loans.”

Strong says a lot of information about business loans circulating in the small business sector is “false”, while banks are relying on risk-based data, which could be skewed by the number of small business taking out personal loans instead of business loans in the first place.

Strong says the Australian Prudential Regulation Authority also has a role in ensuring red tape imposed by the authority on banks is not onerous on small businesses themselves.

“The Australian Prudential Regulation Authority should get involved to make sure those who need the money get the money, those who are not risky,” he says.

Strong says the Australian Bankers Association and Certified Practicing Accounts are in the process of putting together a website for small business to go to see if they can get a loan and help better inform them.

How to Find Low-Interest Personal Loans to Pay Off Debt

Whether you have credit card debt, student loan debt or lingering medical bills, taking out a low-interest personal loan to consolidate those debts might be a money-savings solution you should consider. The term “debt consolidation” has a negative connotation for many people, but the reality is that replacing multiple creditors with a single lender can often save you money and put you on a path to eliminating large amounts of debt.

A personal loan will not eliminate your debt, but it can make it more manageable, especially if you find a low-interest personal loan.

Using Low-Interest Personal Loans to Pay Off Debt

Consolidating credit card debt with a low-interest personal loan can save you significantly over the course of the life of a loan. For example, using Wells Fargos debt consolidation calculator, you can see that exchanging $10,000 of credit card debt that carries a 20.00% APR for a personal loan with a 7.75% APR and a four-year term will save you $4,953.04. This calculation assumes you were paying $250 per month on your credit cards and that you would make a consolidated payment of $242.96. With the loan, you would also pay off this debt a year and a half faster.

Where to Find Low-Interest Personal Loans

One of the most effective ways to find such a loan is to research offers online. If you have an existing relationship with a bank or credit union, you should  contact your representative, but casting a wider net is likely to give you the most flexibility.

Read: 5 Things Everyone Gets Wrong About Personal Loans

“Deciding on a personal loan requires, above all, comparison shopping and due diligence, said Dan Blacharski, a spokesman for MoneyLend.net. Even if your credit is marginal, there will still be options, so dont take the first offer until youve taken time to see what else is available.

Keep in mind that the neighborhood storefront loan shop isnt always going to have the best deal and keep the higher-cost payday loan options only as a last resort,” he said.

What Are Secured and Unsecured Personal Loans?

The difference between a secured and an unsecured personal loan is the collateral you put up to guarantee the loan to the lender. With an unsecured loan, you are asking for money based on the strength of your credit, and with a secured loan, you are offering the lender something valuable to back up the loan. The interest rate of a secured loan is likely to be lower, but if you have trouble repaying the loan, you run the risk of having the collateral taken by the lender.

A “personal loan can be a great help in building a person’s credit history,” said Alex Gerard, founder of CardsMix.com, but unsecured loans are not always an option. “One of the important parts of the credit score equation is the mix of the credits you have, said Gerard. If your credit score is in low digits, consider getting a secured ‘credit builder’ type of personal loan. Combined with a credit card, it can help you in establishing credit and growing your score in one year.”

Ultimately, which type of loan will work for you comes down to your personal circumstances.

Preparing for the Personal Loan Application Process

While the documentation required to get a loan will differ from one lender to the next, there is some standard information that you should be prepared to provide. For example, most lenders will need your name, address and Social Security number; will need to verify your income and employer; and will want to understand your overall financial picture by seeing copies of bank statements.

If you are applying for a secured loan, you should be prepared to provide documentation on the collateral. Having these documents ready will help you to streamline the process.

What to Expect When Applying for a Loan

When you are applying for a loan, you should expect to be asked for a lot of personal information and to give assurances that you are a good risk. It is a good idea to get a copy of your credit report in advance and be prepared to explain any negative items that might appear. Being prepared is one of your best tools.

Ultimately, finding and securing a low-interest personal loan is a good way to consolidate debt and save yourself money. With some homework, you can find one of these loans and improve your overall financial position.

What You Need to Know: Personal Loans for Students

Being a college student is financially demanding. Not only are tuition and living costs expensive, but also there are all of those other costs that no one talks about. Costs, such as rent, utilities, groceries, car maintenance and more, quickly drain college students of their spending cash and part-time earnings.

Many students look towards personal loans to help them cover all of the extra costs while in college. However, the option of a personal loan maynot be the wisest financial choice, especially if a private student loan can cover the extra costs instead.

When Is a Personal Loan Needed?

Student loans are not awarded for more than your schools projected cost of attendance. Therefore, if your loan only covers your tuition, books, and fees, you might be wondering how you will afford your living expenses and groceries. This is where a personal loan can come in handy.

A personal loan is sent directly to you and allows you to control what the money is used for. The student is in charge with dictating how much money is needed, and the bank lends the student money without the school being the middleman.

Should Personal Loans Be Avoided?

The main problem with personal loans for college students is that they can be expensive. Since college students typically have lower credit scores, banks view them as a higher risk. This then gives the bank the freedom to charge high interest rates for these loans. Do you really want to be paying for your college groceries and rent way into your 30s?

Most personal loans will also require a co-signer. For some students, it is easy to secure a worthy co-signer, while others students will have hard time finding the ideal candidate. Personal loans might require students to also show proof of adequate income, which might also present a problem for many students.

Unfortunately, high educational costs today mean that many students will graduate with debt. For a student with few financial options, a personal loan might be necessary to be able to concentrate on schoolwork and focus on obtaining a college degree.

Private Student Loans for Personal Expenses

To cover personal expenses, private student loans would be a better option than personal loans, since students will not have to start the repayment process until after they graduate. Private student loans can cover a wide range of educational expenses, including college dorms and apartments, travel to and from school, food, study abroad opportunities, and a student computer. Not only are private student loans eligible for deferment and forbearance, but also they generally have better interest rates than personal loans. While you might not be able to fund your Cancun spring break trip with a private student loan, you are able to live on or near campus and have all of your needs paid for while going to class.

A personal loan might be necessary for some students, but it is better to scour the available private student loans first find the right loan that meets your needs now and in the future.

To learn more about private student loans and compare rates, visit Credible.

ABC of personal loans

Your colleagues are going on a swanky holiday. You want to join them but don’t have the money. Or, you are facing a medical emergency and your credit card limit is not sufficient. Often, a personal loan is the perfect solution in such situations.

Apply only if necessary

While a personal loan is the most suitable choice for many purposes, there are some instances when it is worth considering other options.

One, for consumer durable purchases, manufacturers and retailers often have financing schemes, with benefits in terms of interest rates and offers which will not come with a personal loan.

Two, for buying a new car, loans are normally cheaper than personal loans. But to buy a used car, a personal loan could be cheaper than a used-car loan. Three, for home improvement projects, you can consider a home loan top-up if you have one.

If you already have a personal loan running at the lowest possible interest rate, you could top-up your existing loan.

If you have multiple dues on credit cards and other personal loans, you could opt for a balance transfer programme.

Under this programme, banks offer a single fresh loan at a discounted interest rate to close all your current oustandings (personal loan and credit card), and offer an incremental loan amount to meet your extra requirements. Also, don’t be tempted to borrow more just because you are eligible.

Choose right

Interest rate range for a personal loan varies from 11.99 to 24 per cent.

Normally, personal loans are fixed rates loans. Banks often offer different interest rate based on income levels, as well as for different categories of companies. So where you work can make a difference.

Some banks offer different interest rates for different loan periods too; similarly, some offer lower interest rates for higher loan amounts.

If possible, choose a loan with part-payment facility as you get the flexibility of using extra cash flows and reduce your interest outgo.

Similarly, most institutions allow pre-closure of loans, and normally levy charges of 0-5 per cent. You could use this facility to close the loan early if you get sudden cash flows. Make use of the several independent loan comparison websites too. Most of the time, a personal loan application can get rejected due to the applicants bad credit record.

However, you can approach institutions (banks/NBFCs) which do lend to customers with unsatisfactory credit track records. Or you can consider the services of agencies that specialise in helping customers overcome their poor credit history.

The writer is Managing Director, RupeeZone