and I would interpret it as below.
(a) You are not financially constrained at all; or
(b) You do not understand the definition of ‘loyal customer’ from your bank’s perspective.
Please stop reading if you fit for (a) otherwise continue reading. There is no synopsis so you have no choice but to read till the of this article. Let’s move on.
I am not a qualified historian hence I cannot advise you when the capitalism has started – probably a way before 1596 when Shakespeare wrote the Merchant of Venice. Today’s capitalism does not involve ‘cutting a debtor’s flesh if one defaults a payment’ but the underlying principle of capitalism remains unchanged – more money means more power.
Do you recall the experience you had with your bank for buying a new property? The bank endlessly asked for a lot of docs from you but you had no choice but to comply otherwise you won’t be able to get a loan to buy your first property. After everything was done, you received a welcome letter from the bank which made you feel like a very important customer.
Do you feel that you are a very important customer of the bank? Because you got letters with an astonishing phrase like ‘an exclusive offer to a loyal customer’? If your answer is yes, then I am very sorry to disappoint you but you have been fooled by the bank’s deception. Assuming that you do not believe me, let me do the following reality test on you.
Can you answer the following question confidently without referring to your latest loan statement?
1) Do you know the current interest rate of your loan? If yes, what is it?
Can you answer the following question confidently without ‘Googling’?
2) Do you know what your bank currently offers and its interest rate? If yes, what is it?
Assuming that your answer was ‘no’ to the questions, allow me to give you the following example.
• Mr Stanton borrowed $500,000 from the bank. The interest rate was 6% and its term was 30 years. The loan started on 1st January 2010 and he needs to make the monthly repayment of $2,500 for the next 360 months.
• One day Mr Stanton was very angry because he realized that the bank started offering a new loan product from 1st January 2012 – the interest rate was only 4% and the monthly repayment was $1,667.
• Mr Stanton asked the bank why he was not informed about the new product and why the interest rate was not reduced from 6% to 4% automatically.
• The bank said “I am sorry Mr Stanton but this product was only available to new customers exclusively hence we could not change the interest rate from 6% to 4% automatically. In order to take this offer, you must refinance your existing loan.
Do you know the reason why the bank did not proactively communicate to Mr Stanton RE: 4% interest loan? Because the bank does not want to lose $833 per month. If the bank has 5,000 customers just like Mr Stanton, the bank will lose $4.1 million per month!
If you are classified as a ‘loyal’ customer, it means simply you are abundantly ignorant and lazy because you do not proactively look for a new product with better terms and switch banks to refinance your loans. The bank wants to explore and exploit your wallet as much as they can and as long as they can. Remember this – your bank will NEVER offer you anything that sacrifices their earnings. Anything says the word “exclusive offer” means they have found another innovative way of ‘ripping you off’.
Just a tip – if your bank suddenly calls you up with an ‘exclusive offer’, tell them that you are actually thinking of switching your loan. Your call will be highly likely transferred to the ‘retention’ team who will most likely offer to a discount on the interest to retain your business.