CUSTOMER STORY
Application
denied
South Africans have been raising concerns that local banks appear
to grant unsecured credit much more readily than home loans.
From some individual customers’ viewpoints this is baffling and
seems driven by a selfish interest to generate more income.
U
nsecured loans, normally offered without the need
of property as surety, generally carry more interest
than secured loans partly due to the risk. Currently
on an unsecured loan, a credit provider can charge
interest of up to 31% a year, depending on the credit
score of the client. A home loan, which is considered secured, will
carry an interest rate of up to 16% at the current repo rate.
Another question that baffles customers is why a bank would only
qualify a customer for a home loan that covers 90% of the property
value, yet approve a high-interest-yielding unsecured loan to cover
the outstanding 10%. Is it simply an issue of generating the highest
interest possible?
One of the South Africans affected by these apprently
contradictory policies is Ms Mbiya (not her real name). She informed
Banker SA that she was denied a home loan by one of South Africa’s
big-four banks, despite her current rent being R3 000 more than her
monthly bond repayments would have been. She was told she did
not qualify for a home loan although she had records of consistent
rental payment. Ms Mbiya concedes that there may be a blemish on
her credit record after a dispute over a cellphone bill, but wonders
whether this is serious enough to disqualify her for a home loan. The
record of that dispute did not stop a bank financing the purchase of
her new vehicle. But what astounded her was the fact that, at the
time her home loan application was turned down, she was offered
an unsolicited personal loan of up to R120 000 from another bank.
Underscoring the seriousness of this matter, last year in a joint
statement titled ‘Ensuring Responsible Market Conduct for Bank
Lending’, the National Treasury and The Banking Association
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BANKER SA
Edition 5
South Africa raised concern that certain banks were ‘selling
inappropriate credit products to maximise margins,’ including the
use of ‘expensive unsecured lending for house renovations instead
of cheaper mortgage loans’.
Although there is nothing illegal in offering more unsecured loans
than home loans, is it moral for banks to behave in this manner, in a
developing country where many people do not have homes that