Homechoice Curbs Debt with Stricter Lending Criteria

Less Room for Arrears

To protect itself and its clients from the afflictions of our defective economy, Homechoice International, the global furniture chain, has decreased the amount of its average loan offering. In addition, the company is implementing a strategy to bolster its cash collections, while also narrowing its lending criteria to high-risk consumers.

CEO of Homechoice, Shirley Maltz stated that they would no longer be mailing their monthly catalogue to credit impaired consumers, so as not to encourage indebted consumers to accumulate more debt.

Maltz also advised that recently they only approved 45% of applicants for credit, so as to rule out any possibility of reckless lending. Though, she acknowledged they’d ordinarily grant credit to +/80% of their existing clients, naturally taking affordability into account.


Against All Odds and Ends

Irrespective of stricter lending criteria, Homechoice asserted that sales were up by 10.6%, ascribing its unswerving success to “the benefits of continued product innovation”.

Though the company’s mail orders suffered because of the South African Post Office’s strikes, throughout the past and present year, its online orders and call centres thrived. The retailer’s quality homeware merchandise – ranging from bedding to kitchen utensils – is available in five countries, where the brand enjoys preference and credibility.


Lower Loans, Longer Terms

Homechoice lowered their average loan amount of R8 466 in June last year, to R7 804 in June this year. The company also extended their average loan repayment term from 18.9 months to 19.6 months.

The retailer delivers their credit services via loan provider, FinChoice. Homechoice is focusing on providing qualifying customers with small, short-term loans, with a maximum term of 36 months, where only 6% of loans are paid off over the maximum term. The business will also be adding insurance to their array of finance products in 2015.


Setting the Example

Homechoice paid out 22% more on loan disbursements this year, bringing the total up to R542 million. Existing customers comprised 7% of borrowers. The company has a total loan book of R1.9 billion, with 9% impairments and 18% provision for doubtful debts.

Clearly, Homechoice’s decision to focus on cash collections and tighten up lending criteria couldn’t have been implemented at a better time, considering the distressing state of the economy and rampancy of reckless lending. Hopefully, other companies will follow suit.

Posted in Homechoice, lending criteria.

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