The unsecured loans, twice more expensive then the backed ones

During the last year, the general conditions of loaning for the population have changed almost in totality. The competition on the banking market directed to more facilities for some loans, despite the repeated signals of the Romanian National Bank. Some costs have been eliminated, but another ones showed up. The personal need loan without mortgage has taken vast proportions. This in terms in which a good mortgaged in favor of the bank, means a final rate of interest with almost 50% smaller.

The Romanians direct with long strides towards insolvency, this is the latest alarm signal drew up by the Romanian National Bank. The statistics show that we take loans more often, we prefer unsecured credits and we feel attracted of euro, Swiss franc, yen, dollar and less of our leu. Otherwise, these are the reasons for which the central bank speaks about an increase of the financial risks afferent to natural persons. The credit market has changed almost entirely in the last years. Although, systematically it was spoken about the harshness of the loaning terms, this was noticed only at the level of costs. Different said, the loans can be accessed easier, but are more expensive. Because in the banks’ acceptation any “favor” costs. In the same time, the most of the ones who take a loan, don’t know what represents an effective annual interest rate, according to the most recent survey carried on by the Group of Applied Economy. On the list of novelties regarding the loaning conditions it is present the increase till 70% of the indebt level, the extension till 80 years old of the maximum age when the loan can be refunded, and also the increase till 40.000 euro of the loans granted without guarantees. And if we also add the elimination of the advance and in some cases the simplification of documentation, we could say that in Romania the banking credits are easy accessed. So accessible that sometimes they are granted only with the ID card. If we take into account the costs which have increased significantly last year, we can explain easier the BNR concern: Romanians take credits of the ones more expensive which they return more and more difficult.

The mortgage halves the interest

One of the loans that have taken vast proportions in the last year is the one of consumption without mortgage, were the guarantees were cancelled almost in totality. Either we refer of mortgage or just a life insurance which covers the risk of invalidity or decease. The figures show that only 22%, of the amount of loans of this type granted to population, are guaranteed with mortgage. As in what concerns the life insurance, this was cancelled in great part, just here and there being granted as bonus. This thing costs, and the invoice is paid by the customer. In the category of consumption credits there are included, among others, the personal need credits, with or without mortgage, the ones for purchasing durables use and holiday credits. The ones that can be compared from the point of view of the effective annual interest rate are the credits for personal need, which exist in the offer of all banks.

“There is a difference at level of interest between the simple credit of personal need (without mortgage) and the personal need credit with mortgage. If the interest for a personal need credit without mortgage reaches an average of 12% for the credits in euro, for example, at the one with mortgage the interest can decrease at half. The interest difference is explained by the fact that for the credit on long term the bank’s intention is of not indebting its customer, and it is brought in this sense a mortgage which will try to cover the risk assumed by both parts. As a result, the customer can access a bigger sum for a longer period having the same income”, Roxana Gavrila, director of communication at the CREDIT TEAM broker mentioned. She also mentioned that when it is made the differentiation of those two types of credits it must be taken into account also the period for granting every type of loan, at the one without mortgage on maximum 10 years, at the one with mortgage between 25-40 years, depending of the bank.

Differences of commissions

The significant difference of interest between those two banking products it can be noticed “with the naked eyes” even from the banks offers. One of the banking institutions which offers the biggest loan without mortgage – 40.000 euro, ABN AMRO perceives for this type of credit a final interest 15,24% for euro and of 22,38% for lei, for a period of 8 years. The fact that there aren’t required guarantees, advance or garants it is compensated by a monthly commission of administration of 0,42%, which it is applied for the balance that remains to be paid. At the same bank, a personal need credit with mortgage means besides accessing a maximum sum of six times higher on 30 years, an effective annual interest rate with a little percentages smaller, respective 8,84% for euro and 14,35% for lei. Moreover, the monthly commission of administration vanishes as out of nothing.

Also, Garanti Bank is of two days in line with the institutions which grant sums quite big - 30.000 euro without requiring a mortgage. The loans are granted for mostly 10 years and the final interest reaches in the case of euro, at 13,5%.But, if we observe the offer of this bank for the products of the same type, also with guarantees, we can observe an effective annual interest rate of 9,71%.Another example is BancPost, which is on the list, more and more numerous of the banking institutions which have “adopted” the crediting with ID. So, for the “Immediate Standard Credit” the bank collects for a loan of 15.000 euro granted for 5 years an effective annual interest rate of 19,24%. In this it is included also the monthly commission of 0,45%. For a credit of 5.000 euro it is necessary only the …ID card. At the same bank, however, for the “Extended” personal need credit with mortgage, EAI for euro is with over six percentages smaller and the monthly commission of administration is out of the scheme. Neither at the Banca Romaneasca things aren’t different, only that here just as Volksbank or CEC the monthly commission of administration is substituted by the commission of credit tracking or by the risk commission, which reach to 0,2% monthly. Concerning the difference of interest, at Volksbank, for a loan of 20.000 lei on 8 years, without mortgage, but with a risk commission, EAI reaches to 15,57% annually. With 4 percentage smaller is the interest for a credit of 100.000 lei with mortgage, also in lei, taken on 20 years. In this case, the risk commission is higher, respective 0,32% monthly.

Impossible move

The differences at all negligible are approved also by the representatives of the banks, which say that it is normally to take additional precautions. Moreover, these say that every customer can choose a credit with mortgage if he has with what to mortgage. What these don’t say is that there is a minimum level of those loans , and for a credit of 5.000 euro there isn’t the option of mortgaging a good. Instead, there is the temptation of a credit accessed on-line , to which it is asked only a copy for the ID. And who would want to mortgage its house for this value? The representatives of the banks recognize even that the Romanians mortgage hardly their houses and not few are the cases in which they resort to several personal need credit without mortgage in order to buy a house. “In case in which a customer wants to bring a mortgage for accessing a credit, the loan to which he will subscribe will become backed credit and will benefit of the characteristics of the interest mentioned previously.
For the backed credits the commissions are also smaller, reason for which we can say that the applicant receives a discount. Although this possibility exists, it is unlikely for a customer which has the conditions for obtaining the required sum of money without bringing a mortgage will insist to bring one in order to receive the same amount of money”, also added Roxana Gavrila.

How is in other countries

In most of the European countries, the interests for the unsecured credits are bigger then at the backed ones, but the difference between those two can be bigger or smaller from a state to another. A major difference it is present at the cost of credits. “The credits structure and afferent costs are much higher in Romania, comparative with other countries, but we must see this aspect also as a measure of bank prudentiality. The problem should be directed towards the way in which is made the informing on the posted interest (which doesn’t include commissions) and informing regarding EAI”, Roxana Gavrila precised