HOLIDAY ON CREDIT
The summer of 2005 will be remembered for the pouring rains, the floods and the long political crisis. Yet, it's time for holiday which Bulgarians traditionally like to spend on the local Black Sea coast.However, most people find it difficult to afford the long-desired vacation because of the high prices of tourist packages offered by the resorts. The well-known frugality of local people is no longer a solution to this problem. In the past years Bulgarians have been learning how to live on credit. The boom of consumer credits comes as a logical explanation.Since the banking activity has remained unchanged for three hundred years - it still consists of attracting deposits and launching credits, the most competitive component nowadays seems to be the packing of the offer and the privileges given to certain customer categories. That is why financial institutions are competing to promote products for special purposes, including seasonal ones.Specialized holiday creditsare still offered by three Bulgarian banks only. The rest are advertising consumer credits simply decorated with a tang of summer, sand and sea. According to some financial experts, even credits that are branded as holiday ones, are in fact consumer credits more brightly repacked.A credit for your holidayThe Piraeus Bank branch and EUROBANK which are in a merger process offer a joint Holiday credit. Its highest amount is BGN10,000, but not more than five net working salaries. It means that the highest amount is available to people whose monthly remuneration after tax does not fall below BGN2,000.BGN10,000 is an amount that would enable a three-member family to buy a ten-day tourist package for a holiday on exotic islands such as Mauritius, Fiji or Hawaii. An enormous part of Bulgarian people consider spending so much money unjustified extravagance.A three-member family can enjoy a modest holiday on the Black Sea coast or in the cheap hotels along the Turkish and Greek Aegean seaside for BGN2,000. If this amount is borrowed from Piraeus Bank or EUROBANK, customers need no guarantees. They only have to prove that their net monthly incomes go beyond BGN400.To lend BGN2,000 to BGN5,000 the two merging banks require only one solvent guarantee. If the credit exceeds BGN5,000 two guarantees are required. The credit is to be paid off in up to 36 months, with a six-month grace period offered as a bonus. During these months the customer is allowed to start preparing himself to pay off the money spent on the holiday. The offer also includes a free life insurance. However, the redemption through equal monthly instalments can only be postponed within the current year. Since the customer has to go on living after his holiday, a credit of up to BGN2,000 is launched under the condition that the instalment does not exceed 25% of his net monthly income. For credits of up to BGN5,000 the instalment must not be higher than 45% and for those up to BGN10,000 it should be up to 30% of the net monthly income.Post Bank is intensely advertising its summer credit (valid from June 13 to August 31, 2005), too. In fact, this is the standard quick credit of the bank which does or does not require a guarantee depending on the amount used. However, for its summer alternative Post Bank offers a three-month deferred payment of the first instalment. The credit can reach BGN10,000 and the candidate knows whether or not he has been approved within one business day. If the answer is positive, he fills in an application form and attaches a copy of his identity card. The credit is payable in up to five years. Apart from a grace period, the bank offers an additional bonus - an EuroLine international credit card.EIBANK's Family Holiday is another credit offered to those who go on vacation. Its highest amount reaches BGN1,600. The credit is payable in one year, but a one-month grace period may be negotiated. The amount is given only once either in cash or on a current and card account in EIBANK. The bank requires that the salary of the borrower be paid on an account in it. The husband or the wife of the customer is considered a co-debtor. Once the monthly instalment is paid, each member of the family regardless of his age is required to have at his disposal BGN70. In case the net monthly income of the potential borrower is not sufficient for this requirement to be met, the bank takes into account the income of the spouse. Moreover, the customer needs to be a proper taxpayer and should not have unsettled liabilities to the state or municipal authorities, as well as overdue debts to third parties. The borrower needs to prove he meets the bank requirements with documents and the procedure takes one week at least, says Karamfila Chavdarova, a bank expert. Therefore, Bulgarian people's habit to improvise and draw credits in the last minute before leaving for holiday is practically unrealizable.The price of summer creditsas well as the price of fast consumer ones is considerably higher than the price of standard credits. This is logical, considering the higher risk that the creditor takes. For example, Piraeus Bank and EUROBANK collect an 18.5% annual interest rate for credits launched without a guarantee (those up to BGN2,000) and a 15% rate for holiday credits that require a guarantee (from BGN5,000 to BGN10,000). The price of the service is additionally aggravated by a fee of 2.5% of the credit amount.In turn, Post Bank requires a single BGN10 fee payable at application as well as a 2.5% single fee for management and processing of the approved credit. The price of the fast summer credits of the bank depends on whether or not the customer has provided a guarantee. If the credit is not higher than BGN5,000 and the customer has a guarantee, the interest is 13.75%, and if it is up to BGN10,000 the interest is 12.75 per cent. Since engaging another person to serve as a guarantee is not always an easy task, the interest for fast credits of up to BGN10,000, including summer credits (with no guarantees) is much higher - 16.95 per cent.EIBANK's Family Holiday fixed interest rate is 14% a year. It is the most favourable one, even though the bank warns that it may be changed, if necessary, by the managing board.Standard consumer creditsof commercial banks may be used for holiday purposes, too. This type of credit is offered by HVB Bank Biochim and HEBROSBANK, United Bulgarian Bank, DSK Bank, BULBANK, First Investment Bank, SG EXPRESSBANK, Raiffeisenbank (Bulgaria), Allianz Bulgaria Bank, UNIONBANK, DZI Bank, the Central Co-Operative Bank and almost all other institutions. There are various credits - with or without guarantees, with cash funds used as security, with overdraft either on card or current accounts. There are also credits for current consumption, for covering temporary shortage of money in the family budget, for tourism or other family events. Interest rates on these credits vary from 9 to 18% and can be either fixed or floating, with base interest levels plus additions depending on the amount, the redemption period and the type of collateral.Summer holiday credits are also offered by non-banking credit institutions such as Jet Credit (interests vary between 11 and 19.5% on an annual base) and Usit Colours which credits students willing to take part in the Work and Travel programs.The easiest wayfor a family to find money for its summer holiday are still the bank debit and credit cards as well as the cards issued by non-banking institutions such as Transcard (its cards are accepted by more than 20 tourist agencies and 74 hotels in Bulgaria).Local credit cards issued by Bulgarian commercial banks such as EuroLine and the international American Express, VISA and MASTERCARD allow a grace period of up to two months which is a serious advantage. They also give you a chance to have money at any time and for any reason - both at home and abroad.