I walked into a Westpac branch recently and noticed a brochure for a new product – the Westpac Flexi Loan. This is a “convenient” product that will help you “start afresh in 2013” if you believe the bold print. As with any bank issued information there is fine print on the back of the brochure, right down the bottom, which makes for interesting reading.
A Flexi Loan is like a combination of a line of credit, personal loan and credit card. Effectively, it’s a personal loan that you have a pre-determined credit limit on, between $4,000 and $75,000. Like a line of credit you may redraw up to the amount of your approved limit, without reapplying. Like a personal loan, the Flexi Loan can be for one, two, three, four or five years. Like a credit card, the minimum repayment is equal to 2% of the unpaid balance (or $10 – whichever is greater), plus any unpaid amounts and any amount that exceeds your credit limit. (I have always wondered how it’s possible to exceed a credit limit, especially as just about all exchanges of money these days involves using a card (credit card purchases, debit card ATM withdrawals, withdrawing cash over the counter at a bank after swiping your relevant bank issued card, etc) and that any attempt to withdraw/purchase over your available amount should simply be disallowed by the card issuer.)
Upon application you’ll be encouraged to get a loan with a higher credit limit than you need, just in case you need it in the future. You’ll pay an establishment fee of $150, plus $10 per month at a variable rate of, currently, an incredibly high 14.69%.
Reading the Flexi Loan brochure was the first time I’ve come across this type of loan but I dare say it won’t be the last. It’s something that has the potential for decent bank profits, regardless of whether or not it’s in the best interests of consumers.
As this product is a combination of a credit card and a line of credit, it’s the sort of loan that I reckon should only be used by people who really know what they’re doing. People who are really good with their dough.
Ironically this means that it’s really best suited for people who don’t need a personal loan.