Loans advanced for cars most likely to default

The Daily Monitor, of 27th August 2020, published an article titled “Loans advanced for cars most likely to default, says report” page 36 as a result of the recently released summitBI Banking Sector Report, 2020.

Volumes and value of used car imports have been declining in the last three years thus eating into government revenues.

Car loans present the biggest risk to bank with borrowers in this category most likely default, according to report. The report also notes that borrowers intending to purchase other goods such as furniture find it difficult to repay money secured to purchase such goods.

Mr Mustapha B.Mugisa, the Summit Consulting team lead, said there is a mismatch, especially because the loans are secured to fund assets that have a high tear and wear rate.

“The main reason is asset mismatch because they get short term loans and put in long term investments. People who lack the financial disciple of matching their debt to the asset they are buying,” the explained.

 

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