Getting loans to pay off debts a tough ask

The State Bank of Vietnam (SBV) earlier this month started to allow home and car buyers to get a new loan to pay for their existing debt, and several banks have begun to offer this type of loan to individuals, which has previously only accessible to businesses.

Nguyen Minh Ha, who owes VND1 billion ($41,200) for a property in Long An Province, contacted state-owned lender BIDV for a loan but found out that the bank puts a lower valuation on his property than the current private bank he is owing.

This means that if he were to get a new loan, he would have to pay an early repayment charge of 3% to the current bank, plus an insurance fee of VND6 million for the new loan at the new bank, and the new loan will be lower than the current one.

Another customer, who asked not be identified, said that there are several fees she will have to pay to get a new loan, and when they are combined, she found that they do not bring about any cost benefit compared to paying the interest for the old loan.

"The process of acquiring the new loan would be very time-consuming."

So far three state-owned banks Vietcombank, BIDV and VietinBank, and private lenders MB and Techcombank, are offering this type of loan.

A branch director of a state-owned lender said that in the last two weeks no new loan of this type has been issued from his bank, as a new property valuation is often lower than the previous one amid a challenging market, which means customers will only get a smaller loan.

The amount of paperwork that a bank has to go through for each individual loan is large but the credit amount is not attractive enough, he added.