Banking on the personal
I remember, when I was a child, my mother putting on her lipstick and my dad his best suit when they went to see the bank manager. In those days having a good relationship with him was key to getting the prime interest rate for your home loan.
Over the past five years of easy lending it was the bank manager who needed to wear his or her best suit to woo the customer.
But things are changing and a good relationship with your bank is fashionable again.
Marcel de Klerk, managing executive of Absa vehicle and asset finance, says that the bank puts more emphasis on the customer’s profile with the bank when approving vehicle finance. Even if the client’s record with the credit bureau is not perfect, if the client has a good track record with Absa, the bank will offer the loan.
Kay Geldenhuys, head of the financing division at mortgage originator ooba (formerly Mortgage SA), says banks are more comfortable dealing with their own clients because references to client history, income and expenses are available.
Geldenhuys says, for example, Absa requires a 30% deposit on loans over R2-million for non-Absa clients compared with 15% for Absa clients.
Peter Schlebusch, chief executive of personal and business banking at Standard Bank, says better rates are offered to their own customers as it is easier for the bank to asses the risk.
“Our customers’ risk profile and transaction pattern is known to us and it is easier to grant more credit.”
But Darryl Lahner, head of credit risk at FNB credit card division, says the bank does not have an exclusive policy to benefit FNB customers. “But it does give us a better feel about the customer,” says Lahner who adds that loans to non-FNB customers display higher risk because there may be a reason they did not apply to their own bank.
Bank customers may still find that even though they have the same good credit record they did a year ago, the interest rates are not as attractive. There is a move back to “prime” being for prime customers. De Klerk says a year ago a customer who may have qualified for prime less 1% on car finance would be lucky to get prime today. If you want to buy a house, best you have a large deposit.
Schlebusch says that for the foreseeable future deposits will be required for home loans and that loans well below prime are a thing of the past. “The days of mortgages at 2% below prime are long gone. That figure is now closer to 1.2% to 1.3%.”
According to ooba only 42% of home loans are initially approved and Marcel de Klerk says on the vehicle financing side, Absa is approving only 30% of vehicle financing applications compared with more than 50% a year ago.
Darryl Lahner, head of credit risk at FNB credit card division, says a customer with a judgment, sequestration order or who has entered into debt counselling will not get credit.
Missing a payment once in a blue moon is not a crisis but if you have missed one payment across several accounts, it will count against you. The bank will also look to see if you have used up your credit lines lately as this could indicate that you are in financial trouble.
If you want to get credit, clean up your record. Pay a few days before the account is due to make sure you meet deadline and make sure any negative reports are removed from your credit record once you have settled outstanding debts.