Permanent TSB offers loans for savers with poor credit ratings
CREDIT unions are set to come under pressure from a new loan offer from Permanent TSB.
The new product is aimed at those with a damaged credit rating or people who can't get a loan because they have no credit record.
Credit unions are traditionally the only lenders prepared to lend to people with blemished credit ratings.
The move by Permanent TSB is part of a new €100m fund it has put together to finance education, car and personal loans.
The bank's Build 'n' Borrow product will require customers to save for at least six months. The savings will then be used as security for a loan. A similar method is used by credit unions.
Consumers will be able to borrow up to four times the amount saved, the Irish Independent has learned.
Loans of between €1,500 and €24,000 would be available, the bank's head of consumer finance Miriam Bloom said.
The new scheme is expected to be attractive to young people who cannot borrow to buy a car because they have no credit history.
It is also set to appeal to those who lost their jobs in the past few years and fell behind on loan repayments, but have since sorted out their arrears.
But the bank denied it was a credit-repair scheme and said the new loans would not be open to those who are in arrears on a mortgage.
The bank is also launching some of the most competitive loans products today as it seeks to build its market share.
Permanent TSB is already making a big play to sweep up new current account holders with some of the lowest fees for these accounts.
It also changed its mortgage offering for new buyers recently by offering lower interest rates. People with bigger deposits get lower interest rates under its new loan-to-value mortgage offering.
The personal loan products have variable interest rates ranging from 9.3pc annual percentage rate for a car loan of €20,000-plus, to 14pc for a personal loan less than €5,000.
These rates meant it would be cheaper for loans than AIB, Danske Bank, Ulster Bank and Bank of Ireland, Ms Bloom said.
She said the bank was determined to grow its share of the lending market.
Ms Bloom said the bank's return to the personal lending market was part of a broader plan to resume normal banking services.
"Our restructuring plans are focused on restoring Permanent TSB as a competitive force for sustainable lending in Ireland.
"We will lend responsibly at rates that are attractive to customers," she said.