For the benefit of any bankers who want to send their clients running as fast as they can to competitors, here are a few quotes from my banker today. I wrote them down in French, so will give the originals and their translations.
After I asked whether it were possible to adjust monthly payments to account for salary increases:
“Oh oui, mais vous savez, il ne faut pas payer au début ! Je veux dire, il faut payer le moins possible !” (“Oh yes, but you know, you shouldn’t pay at the beginning! I mean, you should pay the least possible!”)
Reaction of a client who knows anything at all about how compound interest works: “Wow, that’s a great strategy for a bank to earn as much from the interest as possible, and get myself taken advantage of in another way too, because the principal is amortized more slowly.”
In response to my question on whether there were any fees associated with adjusting monthly payments:
“Oui, il y a des pénalités.” (“Yes, there are penalties.”)
I asked how much.
“Oh ben, les pénalités comme on peut en voir ailleurs.” (“Oh you know, penalties as can be found elsewhere.”)
I repeated my question as to the amount, specifying that it was free at some other banks.
“Hummm… à la date anniversaire, zéro virgule cinq du montant des frais de dossier du prêt.” (“Umm… on the [loan subscription] anniversary date, zero point five of the loan application fees.”)
My reaction: “La moitié des frais de dossier ??” (“Half of the application fees??”)
“Heu… zéro virgule cinq, heu, oui, c’est vrai, ça fait la moitié.” (“Uhhh… zero point five, uh, yes, true, that is half.”)
For information, the application fees are 900 euros. So in order to change payments, it can only be done on the loan anniversary date (rather common practice here), and it would cost 450 euros.
At the end of our meeting, after she’d proposed the worst interest rate by far at 5.01% for a 25-year loan and I’d reminded her that the worst offer I’ve had elsewhere was for 4.80% over 25 years:
“Il ne faut pas regarder les taux d’intérêt, m’enfin !” (“You mustn’t look at interest rates, come on!”)
I reacted by staring at her blankly.
“Mais oui, il ne faut pas regarder les taux. Il faut aussi prendre en compte les assurances, la garantie, les frais de dossier, et au lieu des taux, il faut regarder les mensualités.” (“That’s right, you mustn’t look at the interest rates. You should take into account insurance, the guarantee, loan application fees, and instead of the interest rate, look at the monthly payment amount.”)
Again I stared at her blankly, since their insurance was the same as elsewhere, their guarantee was a full 700 euros more expensive than the worst offer elsewhere, their loan application fee was twice as expensive, and the monthly payments were, naturally, more expensive… and I had to pay a fee to change them.
“Quoi ? C’est vrai, il ne faut pas regarder les taux d’intérêt qu’on vous propose. C’est la mensualité qui est importante. Gardez bien ça en tête,” she said with a motherly tone. (“What? It’s true, you mustn’t look at the interest rates proposed. It’s the monthly payment amount that’s important. Keep that well in mind.”)
Still staring at her, I calmly replied, “Madame, I know enough about finance to know that an interest rate is important.” She continued to insist it wasn’t, so I got up to leave.
The woman in question was none other than the vice director of the Nice branch of my bank. I’m being charitable by not giving their name. Let’s just say it’s the same French bank that “accidentally” lost a few billion euros recently, just in time to claim it as a loss on taxes for a very profitable year, and blamed the loss on a single employee. Not surprising at all, is it?