Personal Finance: Be wary of “Bank Lambert”

You have seen them on street corners and probably used their services. They are mushrooming again across the country despite a recent crack by authorities. They are the new trend in greedy lending practices but still manage to beat the radar of regulation. They don’t charge any interest or fee. You need some quick cash—stop by and in a few minutes, you can be out the door with Rwf50, 000 or Rwf1m. But what is the true cost of this convenience? How It Works Bank Lambert is usually secured by a personal check. You write a check to be cashed or agree to have an amount withdrawn from your bank account sometime in the future; (the standard payroll period). After completing the agreement/contract you are given an amount that is less than what you have agreed to pay. The difference is the “fee” for the loan service. And you have got your cash! Why It Works Why are loan sharks willing to loan you money that easily? Simple, because loaning out money for these fees really amounts to a huge profit at your expense. For example, say you borrow Rwf100,000 and the lender charges a “fee” of Rwf25,000 for each Rwf50,000. Within 15/30 days you will have to repay Rwf150,000 for borrowing Rwf100,000. Now if the Rwf100,000 keeps you from having to pay a Rwf100,000 late fee or penalty on something, it is probably worth it. But if you just want the money for the day, you’re probably paying a high price. What to watch out for1. Early repayment fees. Pay off your loan early and they sock you with another fee.2. Late repayment fees. You may have to pay the entire fee again if you miss the payment date. 3. Giving lenders access to directly debit your bank account. Just hand them your wallet, it’s quicker.4. Bounced check or debit fees. Make sure you have money in your bank account or you get to pay your bank a fee as well.5. Collateral requirements. You miss your payment and you may lose valuable assets like cars. dougie85@gmail.com