Borrower needs to know

What if a friend were to offer you VND 30 million now and you had to repay them VND 35 million a month for the next six months? If you desperately needed VND 30 million now, you might say “yes”. You also might agree to the exchange if you could use that money to make more than VND 40 million within the next six months. Otherwise, you’d probably say “no thanks” to either of the offers above. After all, why should you pay him more than he gave you?

l every time you take out a loan or use a credit card.

CREDIT

means someone is willing to loan you money- called principal -in exchange for your promise to repay the money later, usually with interest.

INTEREST

is the amount you pay to use someone else’s money, usually a percentage of the principal. The higher the interest percentage rate, the higher the total amount you pay to buy something on credit.

When you take out a loan, it’s a good idea to know how the interest is calculated. Your payments will be different depending on the interest formula used by the creditor. When borrowing, it is both your right and obligation to thoroughly learn about loan products (borrowing forms), processes, methods, and the legal issues of lenders and borrowers before making a loan decision.

LOAN APPLICATION PROCESS

Most finance companies offer unsecured loan products based on the customer's creditworthiness and credit score only. For example, you can easily apply for a loan with just your ID and household registration book or driver's license at Home Credit (a multinational company established in 1997, headquartered in the Czech Republic, with total assets of up to EUR 15 billion, thousands of branches worldwide, and more than 130,000 employees). Other documents or proof of income are not required. Home Credit relies on the customer’s CIC credit history to approve the loan limit.

Just like any other consumer credit finance company, Home Credit supports consumer loans for two types of customers:

Existing customer

A customer who uses other Home Credit services, such as an installment loan, installment motorbike loan, etc. Home Credit allows customers to borrow money online by providing installment contracts with sellers.

New customer

A customer who has never used any services provided by Home Credit. The appraisal process is fast and based on the credit history of the customer at other finance companies and banks.

Here are some of the most common types of loans mentioned.

Installment loan

A consumer installment loan is a type of installment loan without collateral. This type of loan is applied to moderate-income customers who need to spend first and pay in installments later for a fixed period. Currently, most finance companies allow customers to have installment loans of up to VND 80 - 100 million for 36 - 48 months, with an interest rate starting at 1.66% per month.

For example, Home Credit’s loans are as follows:

You can visit the website or download the Home Credit app to your phone to receive loan and interest rate details for each loan term. Or if you are not tech-savvy, Home Credit consultants are always willing to assist you when required.

For example, when Tuan needs to borrow a cash loan of VND 50 million to buy a motorbike, he will download the Home Credit Vietnam app to his phone, log in with his personal information, and choose a loan term suitable for his ability to repay. The interest Tuan must pay for the installment of VND 2,500,000 per month or VND 4,000,000 per month will vary depending on the loan term. The good news is that customers don’t have to calculate this number themselves, Home Credit installs an automatic calculation tool and the result is available right after the relevant data has been entered.

In addition to an application for a cash loan, Tuan could also open a Home Credit credit card and use that card for future purchases. Or Tuan could apply for a “Motorcycle loan” package that’s designed for the purchase of any brand- new or used motorbike from legal suppliers.

Tuan has up to 3 loan options, so he should learn which loan is the best for his requirements and conditions.

Unsecured loan

An unsecured cash loan is a cash loan without collateral (referred to as unsecured loan). Unsecured cash loans range from VND 10 to 100 million (depending on the demand and loan agreed). This is a loan paid in installments in each period of the contract and it can be paid off during the loan term.

Here are the outstanding features of Home Credit’s unsecured cash loan:

FLEXIBLE LOAN TERM

Each cash loan is processed by Home Credit within 10 - 15 minutes. The extensive lending network covers a wide range of products, meeting all the customers’ needs for quick loans.

OFFERED LOAN LIMIT

New customers receive a cash loan limit of VND 20 million. Existing customers with a consumer loan contract at Home Credit can borrow up to VND 60 million.

DIVERSE BORROWERS

50% of borrowers of consumer unsecured loans at Home Credit are workers and unskilled workers; business people account for 11%, office staff 8%.

COMPETITIVE INTEREST RATES

From 25% per year. In addition, customers can also join Home Credit’s interest-free 60-day installment plans or consumer loans within the first 1 - 2 months.

Mai’s mother did not allow her to get a credit card to buy a new laptop. Mai could consider taking out an unsecured loan to realize her wish.

How to disburse the loan

When you’re about to commit to a loan, it’s very important to learn how the loan will be disbursed.

Direct disbursement to customers refers to a finance company’s direct disbursement of consumer credit funds to customers in cash or by means of a non-cash payment under the terms and conditions of consumer leases, ensuring that borrowed funds are inspected and supervised with respect to their purposes in accordance with the law¹⁵.

For any cash-free loans, by agreement of the two parties (i) the Lender will directly transfer the respective loan to the Seller/Service Provider, and the insurance company (if any), to make payment for goods and/or services that the Borrower wishes to purchase, and (ii) for interest purposes, such loan shall be deemed to have been fully disbursed to the Borrower on the Disbursement Date.

¹⁵ Article 3.5 of Circular No. 42/2016/TT-NHNN, amended and supplemented by Circular No. 18/2019/TT-NHNN

Rights and obligations of contracting parties

RIGHTS AND OBLIGATIONS OF THE LENDER

RIGHTS AND OBLIGATIONS OF THE BORROWER

¹⁶ Law on Protection of Consumer Rights No. 59/2010/QH12, Circular No. 43/2016/TT-NHNN (amended and supplemented by Circular No. 18/2019/TT-NHNN)

OTHER NOTES ON BASIC RIGHTS AND OBLIGATIONS OF THE BORROWER

Some basic things to keep in mind to make sure that you never breach a contract or incur other costs for any future loan.

1 — Complete the payment obligation before or on the Monthly Installment Day. You may incur a penalty for delayed payment, and you certainly cannot avoid this amount. The payment needs

2 — to be made directly to the bank account stated in the Loan Contract, or via the payment channels mentioned on the Payment Card/ Contract. Never make cash payments for any person (including an employee of a finance company), unless that person is authorized by the lender and provides a valid receipt, in order to avoid fraud or appropriation of property.

3 — For cash loans, you need to ensure you have no bad debt at any credit institutions when signing the Contract. In case you breach this requirement, the credit provider will be entitled to terminate the Contract early – this provision will also be stated in the Loan Contract.

4 — The finance company may send messages and/or call to remind you of an upcoming due date. For any partial or overdue payments, the finance company will send messages and/ or call the emergency contact numbers you provided when signing the contract to be advised or to communicate with you in the event that you cannot be contacted. This action will be repeated until you contact the finance company to process the payment.