Get a Loan, But Early Repayment is a Challenge

Following the article “Home Loan Still Difficult,” several readers reached out to share their challenges in repaying their bank loans ahead of schedule.

Penalty Paid, But Loan Not Settled

Ms. Le Anh, a resident of District 1, Ho Chi Minh City, shared that she took out a home loan from a bank in the city in late 2022. At that time, the interest rate was as high as 15.4%/year. Even after more than a year, when market interest rates dropped significantly, she was still paying 14.9%/year.

Towards the end of 2023, Ms. Anh decided to contact the bank to initiate the process of settling her loan. However, despite her multiple attempts to reach the bank’s credit officer throughout the first three months of 2024, her requests were not addressed. The officer made continuous promises and even asked for more time, postponing the loan settlement to a later date.

It wasn’t until early April, after Ms. Anh had completed all the necessary procedures and paid the early repayment penalty, that the credit officer continued to stall, citing the need for approval. It took more than a week and Ms. Anh’s firm stance of contacting the bank’s head office directly for the branch to finally process the loan settlement.

Many home buyers face obstacles when trying to repay their loans early. Photo: TAN THANH

Ms. Nguyen Thanh, a resident of Gia Lai province, shared a similar experience. She had taken out a loan to purchase a property in a project in Quy Nhon City, Binh Dinh province, for tourism business purposes from a bank headquartered in Hanoi. After two years of struggling with unprofitable operations and the burden of monthly loan payments, she decided to settle her loan.

“I agreed to pay the early repayment penalty and complied with all the required procedures, but nearly two weeks later, the credit officer was still hesitating to process my paperwork and did not provide a clear reason. It was only when I mentioned that I would report this issue to the State Bank that the officer agreed to proceed with the settlement. Isn’t this a case of making it difficult for borrowers?” Ms. Thanh questioned.

Mr. Ngoc Minh, a resident of District 7, Ho Chi Minh City, shared his story of a home loan with an outstanding balance of VND 2.5 billion that he had been repaying for four years. At the beginning of 2024, his family decided to settle the loan and sell the house due to a change in plans.

“I agreed to repay the full loan amount, including any accrued interest and penalty charges, but the bank failed to inform me of when to make the payment and retrieve my collateral. I’ve been waiting for almost two weeks without any explanation, even though I already have a potential home buyer and have set a date for the notarization of the sales contract,” said a frustrated Mr. Minh.

In some cases, when banks became aware of customers’ intentions to settle their loans and switch to another bank with lower interest rates, they would find excuses to delay the process or persuade customers to maintain their credit relationship, promising significant interest rate reductions.

Beware of Backfiring Tactics

Banking and finance expert Dr. Chau Dinh Linh analyzed that the reason behind banks’ hesitation to accommodate early repayments is the impact on their business strategies and long-term loan portfolios. When customers repay their loans ahead of schedule, banks need to find new borrowers to maintain their revenue and profit levels.

However, new borrowers will likely secure loans at lower interest rates than existing ones, making it understandable why banks are reluctant to accept early repayments. “Recently, many banks have been promoting loans to repay other banks’ loans at preferential interest rates, intensifying competition among banks in the home loan market. Not only do they face a decline in credit revenue, but they also stand to lose from other ancillary products and services once customers settle their loans,” explained Dr. Linh. “As a result, credit officers often try to persuade customers to maintain their existing loans, which, if not handled skillfully, can be perceived as ‘making it difficult’ for customers or even backfire.”

A representative of a joint-stock bank headquartered in Hanoi suggested that cases of customers facing delays in early loan settlements might be isolated incidents rather than the norm. According to the bank’s regulations, if a customer’s paperwork is in order, the credit officer must proceed with the loan settlement. The “obstacles” could be attributed to the credit officer’s performance pressure regarding credit growth targets.

The director of a joint-stock bank branch in Ho Chi Minh City acknowledged the fierce competition among banks to retain borrowers, especially with many banks offering loans to repay other banks’ loans at much lower interest rates. “It’s possible that credit officers are hesitant to process early settlements because they fear customers will switch to another bank with lower interest rates,” the branch director said.

THAI PHUONG