Lenders hide information from borrowers | Local company

IF YOU took out a loan to financially survive the Covid-19 pandemic, you are not alone.

Although some borrowers have been able to keep pace with their loan repayments, according to recent data released by the Central Bank, loan delinquencies in Trinidad and Tobago have increased slightly over the past three years.

When a loan installment is not paid by the due date, it becomes past due. Overdue loans in the country increased by 0.3% between December 2019 and December 2021. The Central Bank qualifies any loan overdue by 90 days or more as “overdue” or “non-performing”.

Central Bank statistics (see above) show the total amount of consumer (household) loans granted over the past three years by the banking system, including commercial banks and non-bank financial institutions. Also, it displays the proportion of gross loans that are non-performing loans in the banking sector as a percentage.

According to Christine Nanton-Winter, deputy director of external relations at the Central Bank, a non-performing loan ratio (NPL ratio) of 5% or less is often considered to be in the low to acceptable range.

Although there are many reasons why a loan can become non-performing, Express Business has reviewed some of the loans made by commercial banks and non-bank financial institutions.

It was discovered that while many lending institution employees were willing to get information and sign up for loans, many were unwilling to disclose the “final price” or loan rate. specific interest that would be paid for the loan until the loan is approved. loan has been granted.

Many financial organizations visited by Express Business use terms such as “This is an estimate” or “This is not the final amount, you will know once your loan is approved”.

Yet customers nevertheless agree to the terms of the loan without fully realizing how much money they would actually have to repay. Consumers have a right to know what the bottom line is, even though many players in the financial industry go to great lengths to conceal this information.

Express Business recently approached six lending institutions to find out the total amount that would be owed, including interest, if someone borrowed $50,000 for 36 months. All banks have provided estimated monthly payments, and this publication has used that data to determine expected interest rates. See below.

Note that all data are estimates that have been provided by the corresponding institutions. However, based on the information presented above, choosing which institution to take a loan from is just as crucial as the actual amount.

While some customers may find themselves paying just under $10,000 in interest plus the loan amount, others may struggle to pay back almost double the loan amount. Some of the lenders acknowledged the existence of processing fees, while others claimed that other fees were added to the loan amount, which changed the final total. However, none of the financial representatives made a point of disclosing the amount of the processing fees or other charges.

Although Express Business pegged Island Finance’s average annual interest rate at 29.04%, we spoke with two clients who recently borrowed money from the financial institution and produced documentation proving that the Island Finance’s interest rate was considerably higher.

Brenda (pseudonym) said she had just secured a $50,000 60 month unsecured loan from Island Finance and was ready to discuss the details of her financial transaction with Express Business. With an additional administration fee of $1,527.50, a monthly payment of $1,330 and an interest rate of 45.93% per year, Brenda will have paid Island Finance a total of $79,761.60 over a period of five years. She would pay $29,761.60 in interest only.

If Brenda makes a late payment on her loan, Island Finance may impose a late payment fee equal to 5% of the scheduled regular monthly payment.

According to the Island Finance document, failure to meet a payment deadline will result in the accumulation of additional interest as well as a possible impact on the amount of the final payment, interest charges, finance charges, total payments and the overall cost of borrowing.

If Brenda’s income decreases and she is unable to make her monthly payments, her total payment of $79,761.60 could increase significantly.

Brenda told the Express Business that she applied for the loan from Island Finance this year to settle her outstanding debts and raise money to start a small business that would allow her to better support her family and of herself.

She credits the lack of a down payment or collateral requirement, as well as Island Finance’s quick approval process, as leading her to choose them as a lender.

“It was my first loan with Island Finance,” she said. “I needed money quickly, and they did it with no problem. With hindsight, I would have opted for another financial organization that offered a much lower interest rate.

His sister Susan (pseudonym), who had previously borrowed money from Island Finance, admitted that the loan approval process only took a few days. But after considering her decision, she also agreed that Island Finance’s interest rate was just too high.

The Express Business attempted to contact Duane Hinkson, the CEO of Massy, ​​to inquire about its borrowing policies, but did not respond in a timely manner.

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