Banks reward good customers

These rates apply to home and vehicle loans, overdraft facilities and personal loans, but not credit cards.

The rates give customers an opportunity to save money on interest repayments. But many consumers are still in the dark about this practice and only a few take advantage of it.

Banks said late or non-payment of a customer's accounts gives the person a bad credit profile. This reduces the likelihood of them getting better rates on new debt.

Banks look at the customer's bank accounts and the information at credit bureaux for late payments of accounts such as clothing, telephone, retail store cards and rates and taxes.

"Positive behaviour in terms of accounts paid on time, no arrears, good management of current accounts - all these help to improve your credit profile. This, in turn, will increase your chances of obtaining additional credit," said Victor Gouveia, product portfolio manager at Absa.

'Offered to customers of good standing'

Banks also offer a preferential rate to customers who do all or most of their bank borrowings with them.

Bev Pirrie, manager for credit compliance at First National Bank, said: "At FNB, we offer our customers discounted rates. They are offered to customers of good standing who have an excellent track record of prompt and regular loan repayments."

FNB's prime rate stands at 12.5% and is offered to customers of good standing. The bank offers some of its clients a discounted rate of 1.5% off prime on a home or vehicle loan.

Mark Boshoff is head of mortgage support at Nedbank on overdraft and vehicle finance. He said customers get preferential rates based on risk profile, applicants' credit records, credit history with the bank and rates offered by the market.

Boshoff said clients who had no adverse comments on their credit record stood a good chance of getting better rates.

Can avoid tarnishing their credit profile

Gouveia said Absa offered its clients discounted rates across its credit offerings. He said Absa had entered into special arrangements with its group schemes customers. They are offered an extra 0.5% discount on personal loans over any other discount a customer may qualify for as a result of their credit profile.

He said there were also instances where very good and long-standing customers could get their overdraft facility at or below the prevailing prime lending rate.

In cases where customers are not satisfied with the interest rate they are quoted, they can request the loan to be reassessed by the bank?s credit manager or a branch manager.

Financial advisers said if customers felt they could not maintain their repayments, it was always prudent to talk to their banks and inform them of their current situation before they started to default.

In such cases, banks usually restructured the debt obligation by extending the repayment term. This might make repayments more affordable but not necessarily cheaper.

When consumers encounter financial difficulties, they can avoid tarnishing their credit profile by making arrangements with the bank.