Although we may find that loans are much cheaper every day than in previous years, there are still offers of 30-40 percent, namely commodity loans, the supply of which may additionally be opaque. In addition, they are given at different conditions by dealers, although there is a much more transparent and cheaper construction. Due to increasing retail consumption, it is in the customers’ hands to decide to eliminate what are essentially punitive horror rate loans.
When wages increase, household purchases generally start, and even the consumption-boosting segment of the credit market can gain momentum. However, it does not matter what the price is for the latter – the buyer has to be in the right position, because he can still run on 30-40 percent loans even though he shouldn’t.
They are spending more and more
Retailing has been on a steady growth path, the last time in July 2013 was the decline in non-fuel sales, which has been on a month-to-month basis. This is due, among other things, to the fact that the population is replenishing their previous deferred purchases, and the average salaries have increased – in simplified terms, more money to buy. In addition to gaining weight from retail, Internet commerce is curving at a much higher rate. According to KSH data , Internet and parcel traffic has been expanding by two digits for months, month after month. This is not surprising anyway, as there is always a low base – that is, the previous year’s turnover – and more and more friends are shopping online. In line with this, in June, eNet Internet Research Ltd. announced that Hungarian online retail sales have been growing dynamically in recent years, unlike last year. In 2015, for the first time, the net turnover of Hungarian online retailing surpassed the $ 300 billion mark, reaching $ 319 billion. The growth is really spectacular: in 2005 the turnover was only 19 billion, and in 2010 it was 137 billion HUF. So she has gained several times in recent years.
Loan rates on the ceiling and on the ground
The expansion of retail trade indirectly encapsulates one of the segments of the credit market, namely loan and personal loan schemes, which are the easiest way to finance a purchase. However, it is very important which one we choose.
Namely, commodity loans form a special sub-market in domestic lending. Primarily because they did not necessarily follow the general trend and in many cases, despite the fall in the central bank base rate, they kept their interest rates and their APR on the ceiling. According to our outlook, several stores are trying to salt out credit to shoppers at 35-40 percent interest or thm. The ceiling in this case is no exaggeration because, under the current interest rate ceiling rule, the maximum thm for riskier (unsecured) loans – overdrafts, commodity loans, personal loans, credit cards – may be up to 39 percentage points above the current central bank base rate. Based on a 0.9 percent base rate – it can be basically 40 percent of the maximum thm (it is important that the central bank base rate be taken into account with a half-year crawl and since the base rate was still above 1 percent in March, it is not illegal.
So it’s not against the law, but it’s totally nonsense to include such thm because it’s dirty expensive and there are much better constructions on the market than thm and all the other factors. Peter Gergely, a credit consultant at RaichuBank, who compares bank offers, said that the disadvantage of commodity loans is that they can only be used for a specific product, and the thm of many commodity loan deals is extremely high. “In contrast to trade loans, a personal loan can be spent on anything. What’s more, a personal loan can be taken out just as easily, in flexible terms. Not to mention that they can be much cheaper than 30-40 percent on commodity loans, ”the expert said.
The difference between an average personal loan of less than 10 percent thm and an average but extremely expensive 39 percent loan of thm can be as much as 25-30 percentage points. This can cause the customer to spend thousands of dollars or even tens of thousands on monthly installments.
Same with practice
For the purchase of, say, the $ 375,000 TV set for the Olympics (excluding the $ 75,000 deductible), they give a $ 300,000 commodity loan, according to the bank’s online loan calculator. In the case of a 36-month maturity, it is USD 13.4 thousand per month, so a total of nearly $ 483 thousand has to be repaid.
According to RaichuBank’s personal loan loan calculator , the best of the 300 thousand forints personal loans taken for 3 years can be taken at 15-17 percent thm, which puts the debtor on a 9.7-10.5 thousand forints monthly repayment. and the amount will be $ 370-380 thousand. In the case of a 39-40 percent thm commodity loan, the monthly repayment may exceed 13 thousand forints, and the total repayment is more than 480 thousand forints – the difference is 100 thousand for 3 years.
However, it is also important that strong financial service providers in commodity lending can offer personal loans and commodity loans below the 10% thm limit already mentioned. For example, a merchant company with one of the major electronics retailers has a merchandise credit of less than 10 percent, but this is provided on special terms for a 36-month term only. The same merchandising company calculates its credit on the internet’s calculator at around 39 percent thm.
It is another question whether this is offered to the borrower, as opposed to a commodity loan that generates much more profit for the company. We visited several large network stores, including hypermarkets, electronics and DIY chains, where we found interesting and chaotic market conditions.
40 or 18 percent loan from the same bank
Another disadvantage of the merchant market is that merchant companies compete with each other relatively rarely: in many retail chains, only one or only a few banks or financial service providers provide merchandise. So they have to choose from a rather narrow palette. It was also the case in one of the supermarket chains that the credit of three financial institutions competed with each other. When we ran into one of the big retail banks, this company always came up with merchants competing with merchants. There is a bank that gives a 40,000th thm loan for a $ 500,000 commodity loan for a 36-month term, so the monthly repayment installment will be over $ 22,000, while the total repayment amount will be over $ 800,000.
The strangest thing is that if we ask for 500,000 forints for a three-year personal loan from the same bank, then thm is ticking at just over 18 percent, so you can get out of less than 18,000 forints per month. All in all, you have to pay just over $ 640,000. It also shows that the personal loan is more than 160 thousand USD cheaper in three years, and there is no stipulation on which product to buy.
It is also interesting that the same merchant can offer different designs to the buyers at different merchants. In one merchandise loan, a strong bank offers an electronics dealership either a 0 percent thm or a 10 percent thm offer for a specific term (36 months), or the most common is a loan of around 39 percent. However, for a furniture retailer, the same bank had a lower commodity loan of around 28 percent (under certain conditions) and an electronics retailer had a similar APR for that particular bank. In other words, consumers and buyers need to keep a watchful eye on commodity loans. So it seems that the terms and conditions of a commodity loan vary from store to store, product to date, and in many cases they can be charged at extremely high interest rates.
Thus, commodity loans are more likely to be more expensive than personal loans, and hundreds of thousands of differences may be taxed over several years. What’s more, in the case of a commodity loan, you have to specify what you want to buy the loan for, and what you can spend on a personal loan.
Commodity Loan vs. personal loan
As already mentioned, although the fact that there are commodity loan schemes that can be taken at a much lower thm of nearly 40 percent, it is not entirely clear on the Internet or in each store what conditions we will receive a discounted thm.
In contrast, personal loans have a more transparent structure with online loan calculators . “Personal loans can be taken out quickly now, in just two to three days, so before you buy a TV to watch the Olympics, it’s a good idea to look at personal loans and choose the best one, saving hundreds of thousands with just a few minutes.” Peter Gergely. Personal loans are more transparent to the market and cheaper, plus they are more freely usable, and if that remains the case, commodity loans do not offer a competitive alternative – apart from the possible 0% thm credit.
Commodity lenders should always pay attention, from reading the small letters to choosing the merchant, to whether the merchant lending staff is fully familiar with the merchandise market. For example, if you have multiple merchandise credit schemes available in your store, they will recommend the most appropriate one of the available financial products.
Peter Gergely, a loan consultant at RaichuBank, also said that commodity loans – at least over 30 percent – are not competitive at any level with the personal loans of the buyer due to the aforementioned differences in hourly thm. “To make sure no one runs into a 30-40 percent commodity loan, it’s a good idea to survey the market before buying, and chances are a personal loan will give you better terms. At the same time, it is also very important to choose between personal loans, because millions of sums are already below 10 percent, but there are 15-20 percent, so there can be huge differences in the monthly and the total repayment amount, ”said Marky Gore .
They may appear in new places
The expert, referring to the explosive growth of Internet commerce, also said that even today, the most well-known online stores do not or may not offer mortgages or personal loans for higher value products.
“I think this could change in the future and since integrating online credit calculators on a single page is not a complicated task, so these online stores will also help their visitors find the best banking offer. This way, the buyer can spend more than that merchant, ”said Marky Gore. He believes that the personal loans market is expected to expand in the next period, mainly due to interest rates and thms falling below 10 percent today, but that growth in net real wages may also help the expansion.