Capitec Reduce Unsecured Interest Rates
While a lot of attention has been focused on what the Reserve Bank is doing with the Repo Rate and how that will affect the interest rate maximums that banks can charge to consumers, Capitec have once again gone ahead and turned local banking on its head.
Capitec have announced that they are slashing their interest rates for unsecured credit to consumers. These are clients with loans or credit cards.
Some low risk consumers will be paying as little as 12.9% on unsecured credit which is incredibly low compared to what they could charge. Though the rates charge will vary client by client, Capitec have made a decision not to push for the maximum allowable rate which has become the industry norm.
Capitec have been taking on around 106 000 new clients every month.
A while back Capitec tightened up their lending criteria reducing the possible risk of consumers not being able to repay the credit they are granted. This seems to have really paid off as the bank now report a drop in clients in arrears (down to 5.4% from 6%). They have seen a 15% drop in restructuring loans already in arrears (a second or third time when clients can’t meet the first rearrangement agreement).
Capitec also prefers to lock the interest rate at the point of the loan rather than varying it over time. This helps consumers know exactly what they will pay each month and not introduce too much variation, which consumers can find confusing or concerning.
Capitec has slowly been entering the credit card market and currently have 200 000 credit card users (out of their 4.1 million bank clients). They have 1.3 million clients who make use of credit in the form of loans.
More Clients in Debt Review
Capitec report that the size of the debt that is currently under debt review has grown by 58% recently. This reflects how consumers are making the move to debt review to help cope with the financial pressure they are experiencing. Around 15 000 consumers countrywide are entering debt review every month (many of which have accounts with Capitec).
Capitec follow an interesting policy of writing the debt under debt review to “bad debt written off” Capitec hope to recover the funds but say, at present, they can realistically only expect 20% recovery from these accounts. This may relate to consumers entering debt review but then not following through with the process.
Capitec Debt Review won the top credit provider award, this year, at the 2017 Annual Debt Review Awards and are big supporters of the debt review process.
Capitec saw their interim dividend increase by 17% to R5.25. Capitec obviously feel they do not need to charge the maximum allowable rates to make profit and the way consumers are flocking to become their clients shows that this may be a winning formula.