Lending case study vietinbank – lending profile of buying, building and repairing houses

Definition A loan agreement is a formal contract outlining important counterparty information and responsibilities, as well as credit terms like the loan amount, the type of loan being e

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HO CHI MINH UNIVERSITY OF BANKING

ESSAY COURSE: BANKING OPERATIONS

Topic: LENDING CASE STUDY: VIETINBANK — LENDING PROFILE OF BUYING, BUILDING

AND REPAIRING HOUSES

Module class : BAF301_2411_10_TA21

Ho Chi Minh City, 2024 September

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JOB ASSIGNMENT SHEET

2 Cao Ba Anh

Introduction, Conclusion

Part I Part II, design slide Part IV

Design slide

COMPLETE LEVEL 100%

100% 100%

100% 100% 100% 100%

CONTENTS 004909696009) 012 1

PART II — HOW IS THE LENDING PROCESS FOR CUSTOMERS? WHAT ACTIONS DOES THE BANK TAKE IN EACH OF THESE STEPS) 4

PART II — WHAT IF YOU DON’T HAVE ALL THOSE DOCUMENTS? 10

sale contract, Construction license, Repair contract, Land use right certificate) mean it

Eh-à na 12

of the last three months, Income Confirmation), you cannot get a loan 13 PART IV — HOW DOES THE BANK MAKE THE DECISION ON WHETHER

TO APPROVE A LOAN OR NOT? ooo 13

other financial services

2 Vietinbank

Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) is one of the largest and most prestigious commercial banks in Vietnam, established in 1988 Vietinbank provides a wide range of financial services, from traditional banking to modern financial products, serving the needs of individuals, businesses and organizations

assets Simple procedures, flexible loan conditions

rates and flexible loan terms

rates, loan term up to 20 years

flexible loan packages

infrastructure development projects

study, shopping

3 About the topic of group

Our group's topics focus on the lending profile of buying, building and repairing houses

of Vietinbank We will explore the topic through 5 parts

Part I - What is a loan agreement?

Part II - How is the lending process for customers? What actions does the bank take in each of these steps?

Part II - What if you don’t have all those documents?

Part IV - How does the bank make the decision on whether to approve a loan or not? Part V - Conditions and Terms

Vietinbank offers many preferential policies for borrowers to buy, build and repair houses a) Social housing loan program:

Preferential interest rate: From 7.5%/year for home buyers and 8%/year for investors, applied from January 1, 2024 to June 30, 2024

Preferential period: Incentives within 5 years for home buyers and 3 years for investors Program scale: Up to 30,000 billion VND, implemented until December 31, 2030 b) Loans to buy, build and repair houses:

Loan support: Up to 80% of loan demand but not exceeding 80% of collateral value Loan term: Up to 20 years

Collateral: Can be assets formed from loan capital or other assets

PARKTI_- WHAT IS A LOẠN AGREEMENT?

1 Definition

A loan agreement is a formal contract outlining important counterparty information and responsibilities, as well as credit terms like the loan amount, the type of loan being extended, the repayment schedule, and the interest rate

A loan agreement is made between the creditor (the lender) and the debtor (the borrower), although itis generally prepared by the lender’s legal counsel in order to ensure the legal enforceability of the contract

A loan agreement may be called a number of different things, including a loan contract,

a credit agreement, and in some cases, a promissory note

2 Classification

Loans may be divided into seven broad categories delineated by their purpose: Real estate loans: Are secured by real property-land, buildings and other structures-and include short term loans for construction and land development and longer-term loans to finance the purchase of farmland, homes, apartments, commercial structures, and foreign properties

Financial institution loans: Include credit to banks, insurance companies, and other

Miscellaneous loans: Include all loans not listed above, including securities loans Lease financing receivable: Where the lender buys equipment or vehicles and

leases them to its customers

PART II —- HOW IS THE LENDING PROCESS FOR CUSTOMERS? WHAT ACTIONS DOES THE BANK TAKE IN EACH OF THESE STEPS?

1 How is the lending process for customers?

Step 1: Finding prospective loan customers

Most loans to individuals arise from a direct request from a customer who approaches a member of the lender’s staff and asks to fill out a loan application

On the other hand, business loan requests often arise from contacts the loan officers and sales representatives make as they solicit new accounts from firms operating in the lender’s market area

The origins of borrowing requests, particularly the differences between personal loans and business loans:

loan

especially through outreach and sales efforts The process of acquiring business customers can be lengthy and requires significant effort from credit staff Step 2: Evaluating a prospective customer’s character and sincerity of purpose Once a customer decides to request a loan, an interview with a loan officer usually follows, allowing them to explain their credit needs

That interview is significant because it allows the loan officer to assess the customer’s character and sincerity of purpose

If the customer lacks sincerity in acknowledging the need to adhere to the terms of a loan, this must be recorded as a strong factor weighing against approval to the loan request Step 3: Making site visits and evaluating a prospective customer credit record

When a business or mortgage loan is requested, the loan officer frequently conducts a site visit to evaluate the customer’s premises and the condition of the property, as well as to ask any necessary follow-up questions

The loan officer” may contact other creditors who have previously loaned money to this customer to see their experience

Did the customer fully adhere to previous loan agreements and, where required, keep satisfactory deposit balances?

A previous payment record often reveals much about the customer’s character, the sincerity of purpose, and a sense of responsibility in using credit extended by a lending institution

Step 4: Evaluating a prospective customer financial condition

If all is favorable to this point, the customer is asked to submit several crucial documents the lender needs to fully evaluate the loan request, including complete financial statements and, in the case of a corporation, board of directors’ resolutions authorizing the negotiation of a loan with the lender

Once all documents are on file, the lender’s credit analysis division conducts a thorough financial analysis of the applicant to determine whether the customer has sufficient cash flow and backup assets to repay the loan

The credit analysis division then prepares a summary and recommendation, which goes

to the appropriate loan committee for approval

On large loans, members of the credit analysis division may give an oral presentation, and discussion will ensue between staff analysts and the loan committee over a loan

Step 5: Assessing possible loan collateral and signing the loan agreement

a) Assessing Loan Collateral

Collateral typically includes real estate, vehicles, valuable documents, or other valuable assets The purpose of the assessment is to determine the actual value of the collateral compared to the loan amount

The valuation process may involve hiring independent appraisal firms, checking the legal status of the asset (ownership certificates, any legal disputes, etc.)

The bank considers whether the collateral can be easily liquidated in case the borrower defaults If the asset is easy to sell and holds stable value, the bank will rate the collateral highly

b) Signing the loan agreement

After assessing the collateral and agreeing on the loan amount, duration, and interest rate, both parties proceed to sign the loan contract

The loan contract will detail the loan amount, repayment period, interest rate, payment methods, and the rights and obligations of both parties

For loans with collateral, the loan contract will also specify the usage rights and responsibilities related to the collateral The bank has the right to manage or sell the asset

if the borrower defaults on payments

Additional commitments: The borrower must agree not to transfer, sell, or re-pledge the collateral without the bank’s approval during the loan period

Step 6: Monitoring compliance with the loan agreement and other customer service need

The new agreement must be monitored continuously to ensure that the terms of the loan are being followed and that all required principal and interest payments are being made

as promised For larger commercial credits, the loan officer will periodically visit the customer’s business to check on the firm’s progress and see other services the customer may need

2 What actions does the bank take in each of these steps?

Step 1: Finding prospective loan customers the bank will be:

about loan products through various channels such as websites, branch staff, and advertisements

loans, interest rates, borrowing conditions, and application processing times This helps customers better understand the requirements and benefits before preparing their loan applications

The bank will be preparing loan documents:

After the consultation, customers prepare and submit loan documents to Vietinbank The required documents usually include:

registration book, or temporary residence certificate (KT3)

(for businesses)

(ownership certificate for residential property), or other valuable assets such as

cars, savings books, or insurance contracts

* Loan purpose documents: For home loans, customers need to provide a sales contract, building permit (for construction loans), or other relevant documents proving the loan’s purpose

Step 2: Evaluating a prospective customer’s character and sincerity of purpose Documents on the purpose of using capital:

You need to prepare documents on the purpose of using your capital to provide to the bank Simply put, you must explain what the purpose of using the loan is? What to buy? According to the provisions of the Law, all bank loans must prove that the purpose of using the capital is legal

For example, some loan cases are as follows:

Purpose of repairing the house: You need to prepare the red book of the house to be repaired, the construction and repair estimate

Consumption purpose: For this purpose, customers are almost not required to have documents proving the purpose of using the capital Instead, some banks require customers to sign a commitment to use the consumer loan legally

Purpose of using capital is Buying a house, buying a car: You need to prepare a sales contract, deposit papers, payment notices (if any)

Business purpose: You need to prepare a business registration, financial statements or income and expenditure reports of previous years, define a plan and capital needs in the future year (specifically, the Bank will provide further instructions),

Some question about:

Customer loan needs: How much money does the customer need to borrow? For how long?

Customer loan purpose: What is the customer borrowing for: Shopping, debt repayment, investment, consumption If borrowing to buy, what to buy? Has the contract been signed? - If borrowing for business or investment, what products to sell, what fields to invest in? How long does it take to turn over capital?

In case the customer asks for a consumer loan, you can skip this question

Step 3: Making site visits and evaluating a prospective customer credit record

Credit assessment:

This is a crucial step in Vietinbank’s lending process, involving:

¢ Verification of personal documents: The bank checks the accuracy and legitimacy

of personal documents, verifies the customer's address, and confirms their identity

their credit history (via the National Credit Information Center - CIC) to evaluate repayment ability The bank also assesses any existing debts to ensure that the customer’s financial situation can support the loan

of the assets, either through its internal assessment team or by hiring an independent appraisal service The valuation helps Vietinbank determine the maximum loan amount based on the collateral's value

Step 4: Evaluating a prospective customer’s financial condition

book, cars are the vehicle registration, etc.)

In cases where third party assets are used as collateral, customers will need to provide additional ID cards and household registration books of the property owner

After collecting enough customer information in the above steps with preliminary records

of the customer's work, the bank will decide to verify that information with the customer valuation

Identify the customer's: Exploit information to find out if the customer has any assets to secure the loan? If so, what assets? What is the legal status? Has it been used to secure another loan?

Identify the customer's income sources: In addition to collateral, the bank also accepts income from salary (with complete documents as in step 2) The staff will be responsible for finding out if the customer has a stable monthly income? Where does the income come from? How much money do you receive each month? Besides your own income, are there any other sources of income (renting a house, renting a car, renting property ) or does your spouse have income?