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Wednesday, September 3, 2014

VERY HARD TO GET CAR LOANS: Credit squeeze hits auto industry

VERY HARD TO GET CAR LOANS: Credit squeeze hits auto industry
PETALING JAYA - Banks are rejecting close to 60% of vehicle loan applications amid a credit squeeze.
Top on their red-flag list are applicants with two or more instalment defaults on other loans.
Nanyang Siang Pau reported today that apart from raising interest rates, banks are now more stringent in processing vehicle loan applications in order to lower the risk of bad loans.
"Defaulting on two instalments on any previous loan is enough to cost an applicant a rejection," a source said.
"However, it also depends on the period of default. If it is just one or two days each time, or if the borrower had forgotten about the due date, it is another story.
"But if the applicant had defaulted up to a month in repayment, it calls into question his/her ability to repay a loan," the source added.
As a matter of practice, banks consult the Central Credit Reference Information System (CCRIS) or CTOS (Credit Tip-Off Service) to check the credit reports of loan applicants.
The credit reports provided by CCRIS or CTOS contain individuals' financial history specifically related to their ability to repay borrowed money.
This means past or existing loans or even credit cards held with other financial institutions will have a bearing on new loan applications.
Bank Negara Malaysia's statistics showed that of the total vehicle loans of RM7.24 billion applied for in May, only RM3.72 billion, or 51%, was approved.
The vehicle loan approval rate dropped further to 48% in June when only RM3.66 billion from a total of RM7.55 billion applied for was approved.
Perodua president and chief executive officer Datuk Aminar Rashid Salleh said many people want to make a booking but find it hard to secure loans.
"The rate of rejection of car loans is 40-45%," he said.
Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor said the used car business has also been hit hard by the credit squeeze and as much as 60% of the used car loan applications have been rejected. -Sundaily

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