CHOICE membership

Coles now with Personal Loans


#1

Coles has just recently advised of a new financial product, Personal Loans from a starting point of $5,000 dollars. This move is obviously an extension of their Credit providing facilities eg The Coles Mastercard which they are heavily advertising on TV at the moment.

As a “sweetener” they advise if you are a Flybuys member they will give a better interest rate compared to if you aren’t. With an ability to redraw credit on the loan it can turn from a loan that was for some set period eg 3 years (they offer three loan terms) to one that has no end date.

The message I received said you could see what you might get and the quick process would not affect your credit rating (this could be 2 separate enquiries each one requiring a bit more data). To go further then requires a full credit check and really amounts to an application. It also tries to sell the personal loans as a means of keeping “control of your finances”, I feel this is a bit of a stretch on the idea of control.

I have not been happy with the two big Supermarket chains and their delving into financial products but the pace seems to be growing particularly with Coles at the moment and I wonder how long it will be before Woolworths responds in a similar way.

I am concerned on a number of issues but the unending loan is one of my grave, if not my gravest, concerns.


#2

It seems that most of our businesses are doing the same thing, not just Coles and Woolies. The auto clubs branched out. Qantas is selling insurance. Every company is trying to get their hand into every potential pot that may have a dollar to be had.

I for one find it unsettling they do this as it dilutes their brand and turns them each into just another cheap salesman. The ‘financial product’ you describe reads like a credit card by another name; could it be a cynical way to circumvent regulations on cards?


#3

It’s worth the thought.

Boards and share holders tend to reward growth ahead of profit.
Both count towards ROI, one before tax and the other after.

For everything else there is Telstra! :star_struck:


#4

I hope Coles keeps the interest rates “Down, Down leave em all down …” As Status Quo sings in their Coles TV ads .


#5

Don’t get me started on auto clubs.

I’m waiting for the day when I order “two all beef patties special sauce lettuce cheese pickled onions on a sesame see bun” and get asked “would you like fries and a financial service with that?” …


#6

It’s their reason for existence, to help you get started! (Or it used to be?)

Brand confusion might work against the business model of mixing fast food with personal financial products.

Would you continue to buy fast food from the same outlet that sold you that personal loan you are struggling to repay? Would you dare to front up for a meal if you slip behind a repayment? Conversely if you don’t like the food would you go there for a loan or insurance?

Coles and others may seem keen to entice all into a Coles or Woolies rabbit hole for the rest of our lives. From pay day to their funeral insurance to their mortuary service and in store wall of remembrance.

Fast food does not seem a wise fit unless you tie it to the last mentioned of the integrated shopping experiences. And does this not kill the golden goose too?


#7

What a joke.Supermarkets should stick to selling food products and making sure customers are happy.Getting involved with this sort of stuff i feel down the track can backfire on them.Look at the Banks how they get involved with overseas investments and insurance.A lot of the time banks get out of the deal,as they make no profit and actually lose money.Stick with what you know best


#8

I gave up using my Coles Mastercard which I have had for many years due to the difficulty of accessing my statement. No one else is going to pay it so why make it so hard.


#9

That’s good :rofl: There needs to be a touche badge!

It is odd. On a tangent but still clinging to the topic (welcome split if this is a hot button) - ‘integrated shopping experiences’ - what a good term to describe where at least some of the market is heading. It gave me an instant distaste because I thought of OTR (OnTheRun) service stations in SA - possibly elsewhere. The gold standard of convenience shopping where along with your fuel you can buy low value, low quality, low substance anything at a premium price, for convenience. I think I’d rather my next prostate examination done by Edward Scissorhands than go back to OTR - If that is an integrated shopping experience, which describes it well, then there should be a law against it. I don’t know if OTR do loans … watch this space I guess.

That said, and to be my own devils advocate, this horse probably bolted decades ago … supermarkets, as one example. Hardware stores as another.

One thing is for certain, I won’t be hitting Coles for a loan, I’ll go to the bank where I can be screwed by professionals with hundreds of years experience - at least with the blowtorch being waved at them if not applied, they are probably a little more customer focused for a brief moment in time.


#10

While it’s not the only product where this occurs, the comparison rates really vary quite wildly. If you compare this with a search on Mozo (inputing $10,000 over three years), there are a number of larger credit unions and banks with much more favourable comparison rates.

Furthermore, linking in Flybuys bonus points to the value of the loan may seem like a good thing to some, but it can also disambiguate the real costs and savings and create confusion. Shopping based on loyalty points has the chance manipulate buyer behaviour and if you’re shopping for points instead of the best value items, you may find you’re spending more overall.


#11

Comparison rates are not useful excepting as a way for banks to present information on ‘not your loan’ so you can compare ‘not your loan’ across institutions.

To wit: (I have posted this before) The comparison rate is always calculated on a loan of $150,000 P&I for 25 years. What does that mean for a loan that is $50,000 or $500,000, or one for 10 years? In comparison the US uses an ‘annual percentage rate’ that factors in all fees for Your Loan, not an arbitrary loan and compares what Your Loan costs at each institution.

Our comparison rate seems like a furphy in comparison to the APR. It is a wonder Choice has not taken this on to better educate consumers in the comparative costs of Their Loans across institutions. Using an APR would also help us understand the competitiveness of each institution, and APR is harder to game than the comparison rate that can be fine tuned to the specific $150,000 P&I 25 year loan.


#12

I appreciate your sentiment @TheBBG, and I agree that comparison rates should reflect the massive increases that we’ve seen in the property market. Perhaps the US version of the APR is the way to go, although I’ve only had a brief look at it. Using some info from the links provided and looking at some other examples, two similar home loan comparison rates using the prescribed $150K could be obscuring the cost of a large home loan by up to $10,000 over the lifetime.

Obviously, that’s a concern and it highlights the importance of people performing their own sums based on actual loan amounts and terms. The abovementioned site will allow you to input this data online and make that calculation for you.

For personal loans, my understanding of the regulation is that smaller amounts are also prescribed for the purpose of calculating the comparison rate (copied the relevent section below for reference). Coles is using the 30K / 5 year option, but again it would be better to use your actual loan amount and loan period in a calculator to get the most accurate result. I’ll be sure to mention the US’s APR system to my colleagues in finance as point of interest in the near future.


Part 7‑8—Comparison rates

For subsection 161(2) of the Code, the designated amounts and terms for which a comparison rate is to be calculated are:

                 (a)  $250 for a term of 2 weeks; and

                 (b)  $1 000 for a term of 6 months; and

                 (c)  $2 500 for a term of 2 years; and

                 (d)  $10 000 for a term of 3 years; and

                 (e)  $30 000 for a term of 5 years; and

                  (f)  $150 000 for a term of 25 years.

#13

Yes, but they also seem to be in the business of making money. The says of real not-for-profit organisations is disappearing. I suspect they will argue that if they return a profit on other services, it will keep membership costs down…but, they have higher operating costs which also need to be covered by providing the additional services…a revolving wheel.


#14

Assume it is “the days of”.
The iPad randomly tries to correct my typos into unrelated words that can be quite comical. Worse when it delays the correction and a word with one letter in error becomes two unrelated.

“Not-for-profit” I once thought was an organisation that was run and staffed by volunteers, or in the special instance of religion where staff worked for a subsistence pittance.

This probably deserves a new and separate thread - generically or one that looks more specifically at the value of a particular group such as motoring clubs?


#15

If you have Flybys you will be more likely to shop at Coles, so they win by attracting more shoppers, and (remembering that most Australians don’t pay off their credit card each month) then get to impose charges onto those purchases.


#16

Further to my dislike of these personal loans is the bit of Flybuys advertising that offers a 20K flybuy points for taking up he offer of a loan by the 31 Oct 2018. It gives me feeling that they intend a “rush into it so you can get points” attractant.

Capture

And they add the Coles Mastercard to that points reward tally

Capture

Almost feels like a spend with no thought to consequences type of ad??


#17

Agreed @grahroll. In previous research, CHOICE calculated that credit card points are often worth less than 0.01 cent and FlyBuys points were lower still :hushed:


#18

My experience is that points are generally worth about $0.005~0.006 when one considers the street prices of products. If one can get a flight reward it can be close $0.01 if you discount the trouble getting a seat or upgrade, but even then not always.


#19

Seems super shonky tbh


#20

I still think it is worthy of a “Shonky”. Now the signs are out and you can clearly see the push to sell the loans with the attraction of garnering of extra flybuys ™ and/or the special rate you get with being a flybuys ™ member. Not a good look in my opinion! But certainly a push into financial products that both Coles and Woolworths seem determined to do.