Banks and the race for low-interest loans: Don't be too happy!

Wave of preferential loans

Present at the branch of Ho Chi Minh City Development Joint Stock Commercial Bank ( HDBank ) in the last days of the year, Ms. Thu Ha (Dong Da, Hanoi) is learning about credit packages for new individual borrowers or existing individual borrowers who want to borrow more.

When being advised about the 0% interest rate loan promotion, Ms. Ha was very interested. However, when she learned that the 0% interest rate only applies to the first month; the remaining months are at the current interest rate of this bank, she clearly expressed her concern because the loan interest rate can increase at any time, easily leading to a state of inability to repay.

Mr. Manh Tuan (Cau Giay, Hanoi ), a person who wants to borrow money to buy a house or invest in real estate, shared: "I myself really want to borrow money, but partly because I am worried that interest rates will increase again after the preferential period or suddenly increase, and partly because the real estate market is "frozen", so I do not dare to invest money."

Finance - Banking - Banks and the race for low-interest loans: Don't be too happy! — Banks compete to lend at low interest rates.

In the final months of the year, many banks have launched attractive credit incentive packages to stimulate credit demand of individual and corporate customers.

Specifically, HDBank is implementing a VND10,000 billion credit package with a preferential interest rate of 0% applied in the first month.

For corporate customers, HDBank continues to add a preferential package with a scale of 5,000 billion VND, 0% interest rate in the first month for small and medium enterprises (SMEs) and for the purpose of paying salaries and bonuses at the end of the year. The interest rate for the following months will be 6.7%/year.

Vietnam International Commercial Joint Stock Bank (VIB ) has recently launched a loan program for individual customers. The purpose of the loan is to repay the loan at another bank early with a preferential interest rate of 0% in the first month.

From the following months, the preferential loan interest rate is from 5.5%/year for individual customers borrowing capital for business; from 6%/year for customers borrowing to buy cars and 7.5%/year for loans to buy real estate, build and repair houses.

Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) also deployed new capital to accelerate production and business, with a limit of 10,000 billion VND for businesses to borrow, with interest rates of only 3%/year for a 1-month term, 4%/year for a 2-month term, from 5%/year for a 3-month term, from 5.5%/year for a 4-12-month term.

In addition, Sacombank has allocated VND1,000 billion for medium and long-term production and business loans and car purchases for businesses, with the fixed loan interest rate adjusted down within 12 months to 8%/year, the loan package is implemented until December 31, 2023.

BVBank also applies a loan interest rate of 5.5%/year to individual customers who need to supplement short-term or medium- and long-term capital for production - business, agricultural production, investment in equipment and machinery;

Capital for consumer life such as receiving real estate transfers for residence, building new or repairing houses, apartments for residence, consumer shopping...

Sprint to achieve credit growth target

Explaining the reason why banks continuously launch incentive packages, even lending at 0% interest rates, Dr. Chau Dinh Linh, Banking University of Ho Chi Minh City, said that this is a move to stimulate credit growth of banks at the end of the year.

According to data from the State Bank as of December 20, credit growth of the banking system has only reached 10.85%, although it has reached the double-digit mark, it has still not reached the growth target of 14%-15% for the whole year.

Finance - Banking - Banks and the race for low-interest loans: Don't be too happy! (Image 2). — Dr. Chau Dinh Linh, Banking University of Ho Chi Minh City.

Sharing the same opinion with Dr. Chau Dinh Linh, Associate Professor Dr. Nguyen Huu Huan, University of Economics Ho Chi Minh City, said that lowering lending interest rates like this is to encourage people and businesses to borrow money.

Partly it is to resolve the surplus mobilized capital that has not been lent out, partly it is to try to reach the credit growth target so that next year we can be granted more "room".

Mr. Huan also noted that the bank's 0% interest rate loan is only to stimulate short-term lending in the first 1-2 months, after which it will follow the current interest rate of that bank.

Talking about the 0% lending interest rate, Mr. Huan said that the 0% threshold is considered the fatal threshold of monetary policy, because the nominal interest rate can only be 0% and cannot have a negative nominal interest rate.

This expert believes that such low interest rates also pose some risks to the economy. Because when consumer demand and credit demand are weak, increasing money supply will have no effect, and the result is that interest rates will approach 0% and at this point, even if monetary policy is loosened further, it will not have much effect.

According to Mr. Huan, borrowing to invest at the present time has many risks because the market has not shown signs of recovery. However, the lending interest rate at the present time is quite attractive, so depending on the risk appetite of each investor, they will choose to borrow or not.

Mr. Linh believes that benefits always come with risks. Therefore, investors need to balance and make wise decisions to both gain profits and ensure the lowest risk, not just because of low interest rates that they borrow indiscriminately .

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