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On-lending reached automobile and consumer loans
Consumer refinancing of loans, or, more simply put, refinancing, started in Russia recently - only last year. Starting with the most guaranteed segment - mortgage loans , bankers today expanded on-lending programs to auto - and even consumer unsecured loans. However, such offers are currently available only to those borrowers who have not made late payments.More and more opportunities
Competition in the consumer lending market forces banks to fight for customers. Moreover, if earlier bankers were concerned with attracting new ones, now they are increasingly faced with the task of retaining existing ones and, if possible, luring “foreign” borrowers . Refinancing became a suitable tool for this. This service is already offered by a number of large banks - mortgage market players: VTB-24, Bank of Moscow, Raiffeisenbank. At the same time, the latter entered into an agreement with the credit broker Fosborne Home, which helps increase the popularity of the program. Since the rates in the mortgage market of banks engaged in mass lending are already as close as possible to the inflation rate and leave almost no room for reduction, banks are counting mainly on borrowers who took out a loan a couple of years ago. In the case of a mortgage with considerable amounts and terms, reducing the rate by even 1% can save several thousand dollars. But now banks have gone further and offer refinancing even for medium-term loans.
The car loan refinancing program operates at Raiffeisenbank together with the Musa Motors car dealership network with rates starting from 9% in foreign currency and 10.5% in rubles. And recently Absolut Bank announced the launch of on-lending for cars at all its locations. Here we are ready to refinance any types of car loan programs for used foreign cars no older than nine years and used Russian-made cars no older than six years.
On-lending is carried out according to the bank’s standard program: 10% per annum in dollars and 14% per annum in rubles for a period of up to five years. “When refinancing, as with a regular loan, both rates and terms matter. At the same time, car lending works not only by offering “old” borrowers a lower rate, but also by increasing the loan term for those for whom the monthly payment on an existing loan seems excessive. “If the borrower’s goal is to reduce the overall cost of the loan, he will pay attention to the rate, which has decreased by 2-3% over the past year and a half. If the goal is only to reduce the monthly load, the client will focus more on the loan term, which has increased from three years to five, which seriously reduces the loan payment,” says Emil Yusupov, director of the retail banking products department at Absolut Bank.
A similar offer in a riskier segment - unsecured consumer lending - is offered by Citibank. However, for now the bank is ready to refinance only its clients. “Refinancing is offered to customers who have repaid the originally issued loan in good faith for at least six months. In addition to preferential interest rates and a significantly larger loan amount, we offer the shortest possible processing time for applications for refinancing - money is transferred to the client’s account within 48 hours from the moment the loan application is signed,” said Natalia Nikolaeva, vice president of the bank. According to her, the rates offered to clients vary from 16 to 20% (the initial rates for borrowers at the bank are also not the same, but depend on the risk assessment).
Not all borrowers find Citibank's offer profitable, especially if the loan is small - when re-issuing, 2% of the new loan amount is charged. But those who want more and for a long time may like the offer: refinancing will be offered every year, and for the second, third, and so on, you will no longer have to pay a commission.
The willingness of banks to extend terms for borrowers who want to reduce their monthly payments seems risky. But bankers assure that there are not many people willing to pay less, but longer. “If, for example, the borrower’s income has decreased, we are also ready to consider the option of increasing the term and, accordingly, reducing the monthly payment. This is better than having problems with payments from such clients. Although so far only one borrower with a very serious loan amount has made such a request,” says Vyacheslav Shalamov, deputy head of the mortgage lending department of the Bank of Moscow. In addition, to protect themselves, banks offer refinancing only to disciplined borrowers who have not been late on the original loan. To refinance a car loan at Absolut Bank, you need at least a three-month history of payments on the “old” loan.
Banks defend themselves
Since the process of luring clients has intensified, banks are trying not only to capture strangers, but also to retain their clients. Refinancing helps a lot with this. “All our credit managers received instructions on how to work with a client who decided to repay the loan early,” says Vyacheslav Shalamov from the Bank of Moscow. “The manager definitely finds out the reason, and if it becomes clear that the borrower wants to go to another bank, we are ready to consider its conditions individually and reduce the rate.” This opportunity has been available at the Bank of Moscow since the beginning of the year, but three borrowers have already been dissuaded from leaving for another bank.
Nowadays, most banks, fearing the loss of clients, include in their contracts a clause stating the impossibility of refinancing the loan. “But refinancing programs are designed primarily for borrowers who took out loans several years ago - and in 70% of cases there were no prohibitions yet,” says Shalamov. In addition, the prohibitions are easy to circumvent.
It is possible to refinance even if the bank agreement - the primary lender prohibits this. “We have two refinancing schemes: one in case there is no prohibition on refinancing in the primary lender’s agreement, and the other if there is,” says Mr. Shalamov. In the first case, the client simply takes out a loan, returns the money to the primary creditor bank, goes to the registration chamber and re-registers the old pledge with a new one. If there is a ban on refinancing, the borrower who decides to refinance takes out a loan from the Bank of Moscow for two months with two guarantors (the rate for using the loan for these two months increases by 1.5% per annum). After this, using the money received, the loan in the first bank is repaid ahead of schedule and a full mortgage is issued in the second. After the mortgage is issued, guarantors are no longer needed, and the rate is reduced to normal.
Formalities
Unfortunately, such formalities as re-registration of collateral with all the ensuing payments cannot be avoided when refinancing car loans and mortgages. And sometimes it may be necessary to change insurance. “Refinancing a car loan is accompanied by such procedures as re-issuing a loan agreement, a collateral agreement and, if necessary, an insurance agreement. There is no need to register anything with the traffic police,” says Emil Yusupov from Absolut Bank. To refinance the mortgage, you will have to re-apply to the registration chamber. If the car is insured by an insurance company that is not accredited by the bank, when issuing a loan, the borrower is obliged to reinsure the car on new terms, according to the rules of Absolut Bank.
Bankers consider refinancing not only to lure away clients, but also to reduce risks. “The purpose of refinancing for the client is to obtain a larger loan amount on more favorable terms than the original loan; for the bank - an increase in the share of loans issued to verified conscientious payers in the total volume of the loan portfolio, and a reduction in the costs of attracting a new client,” sums up Natalia Nikolaeva.