Warning as banks offer personal loans up to $80,000 to customers

BANKS are enticing customers with personal loans for as much as $80,000, waiving loan establishment fees and giving discounted variable interest rates.

EXCLUSIVE: Banks are encouraging customers to renovate or go on lavish getaways by serving them up with enticing personal loan offers for as much as $80,000.

Financial institutions are increasingly looking for ways to scoot around strict credit card rules preventing them from increasing plastic limits and instead they are offering customers with whopping personal loan deals.

Penned from one bank as helping bring customers’ “dreams closer”, the loans are labelled as a quick and easy way to finance “home renovations or a well-deserved holiday.”

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And some customers are told by the enticing marketing they will receive “same-day access to funds for approved customers.”

Banks are trying to lure customers into signing up to personal loans to pay for things including home renovations or lavish holidays.

The latest luring marketing paraphernalia uses tactics that waive loan establishment fees worth hundreds of dollars and gives customers discounted variable rates on personal loans.

But Australians’ conservative nature around debt continues and strict rules now prevent banks from offering customers credit limit increases unless they “opt-in” to receive these deals.

This has resulted in institutions having to look to other ways to get customers to sign up to more debt.

Mozo spokeswoman Caroline Thomas said these types of offers aren’t “necessarily in the customers’ best interests.”

“Paying off a personal loan of $50,000 or more would mean huge monthly repayments, given terms for personal loans are up to five to seven years,’’ she said.

“Like with any form of credit, people need to think about their own personal situation and the time in which they can, realistically, pay it off.”

The Australian Bankers’ Association’s chief executive officer Steven Munchenberg said there was no strict ruling around banks’ offering customers personal loans, as opposed to credit cards.

No strict rules ... Australian Bankers' Association chief executive Steven Munchenberg said banks offering customers personal loans deal was part of their marketing campaign.

“It’s a form of tailored marketing,’’ he said.

“If you are interested we have very strict guidelines and we can’t give you the product we’ve offered you unless we can satisfy our responsible lending obligation.

“A bank can offer you a credit card as a new product at any time but what they can’t do if is you have a credit card is offer you an increase to your credit limit unless you opt-in.”

Data from comparison website Mozo shows the average interest rate on a $10,000 personal loan is about 12.7 per cent.

The average credit card interest rate is about 17.6 per cent.

WHAT WILL YOU PAY

Unsecured personal loan of $10,000

Monthly repayment $335

Average interest rate 12.7 per cent

Lowest interest rate available 8 per cent

High interest rate available 17.6 per cent

Secured personal loan of $10,000

(i.e. often used with car purchases, the car is used as security)

Monthly repayment $317

Average interest rate 8.7 per cent

Lowest interest rate available 5.3 per cent

Highest interest rate available 14 per cent

Average application set up fees across all personal loans is $173.