Borrowers now can seek loans from a credit institution to prepay their existing loans at another credit institution as more credit institutions are introducing the new loan product with attractive interest rates after Circular No. 06/2023/TT-NHNN takes effect from September 1 this year.

After Vietcombank, BIDV this week also officially introduced the new loan product to customers with attractive interest rates from only 6 per cent per year. To date, BIDV is the second credit institution to officially implement the new loan product with lending interest rate from only 6 per cent per year.

Earlier, Vietcombank was the first credit institutions to implement the new loan product. For the loans, customers can choose an interest rate of 6.9 per cent per year in the first six months, or 7.5 per cent per year for the first 12 months, or 8.0 per cent per year for the first 24 months.

Circular No. 06/2023/TT-NHNN amends and supplements certain provisions of Circular No. 39/2016/TT-NHNN. This new circular removes the limitation on borrowing for the purpose of prepaying existing loans at other banks solely for business-related activities. As a result, individuals can now get loans from other banks to prepay their outstanding loans related to various purposes, such as home mortgages, car loans, and personal expenses, at their original bank.

Previously, Circular No. 39/2016/TT-NHNN stated that one of the ineligible purposes for lending includes borrowing to repay debts owed to other credit institutions and foreign loans, except in cases where the loan serves business operations; the loan term does not exceed the remaining term of the old loan; or the loan has not undergone a restructuring of its repayment term.

Circular No. 06/2023/TT-NHNN removes the exclusion of ‘serving business operations’ while retaining the two provisions regarding the loan term not exceeding the remaining term of the old loan and the loan being one that has not undergone a restructuring of its repayment term.

Under the new circular, borrowers can seek loans from different banks to prepay their existing loans. This new regulation introduces necessary flexibility in the cash flow management strategy of borrowers.

With the change, borrowers now have more flexible options. For instance, if they find another bank offering better incentives or lower interest rates for loans, they can choose to borrow from that bank to repay their current loan at the original bank. — VNS