The credit industry has been a relatively recent introduction to the country, and some financing companies have been taking advantage of consumers' lack of knowledge.
Instalment plans aim to increase demand amid economic difficulties
Many firms have been offering instalment deals with quick delivery of goods and services, but with a price tag attached. For example, reporters have found that Prudential Finance has been providing loans for people on a salary of VND12 million (USD572.5) per month at a monthly interest rate of 2.2%. Compounded annually such interest rates can become much higher than customers expected.
"I bought a motorbike for VND37.5 million (USD1,789) and at the end of my nine month contract had to pay VND44.72 million (USD2,133)," said one consumer.
A colleague of his was also sucked into a similar scheme. But she said she had to cancel the contract to buy a motorbike at a monthly interest rate of 4.82% after she learned that she still owed VND19.3 million, even though she made a down payment of VND18 million, plus another VND 10.44 million over seven months.
Many other consumers have found themselves paying larger interest rates than they initially thought, lured in by seemingly low monthly rates.
The Gioi Di Dong electronics store chain has been cooperating with ACS Financial to provide instalment plans that require the customer to pay anywhere from 20% to 70% of the product price and then monthly interest rates which may seem low but add up to upwards of 26% per year. Many such loans specifically target students and low-income individuals.
Within the fine print of many of these short-term loans there are clauses that require the customer to make monthly payments instead of paying off their debts all at once, which could incur them a fine of 2% to 4%. This has left a number of individuals in a no-win situation, faced with fines for paying for their purchases or paying much higher prices over the long-term.
