Other People's Money

Bait and Switch

A couple of months ago I read something about rental properties in Japan, which made me start thinking about loans, which made me take a look at some loan comparison sites, which led me to the Tokyo Star Bank Mortgage Secured Loan.

On paper, this loan looks incredible. You can borrow up to 100 million yen, for up to 20 years, at an interest rate of 0.8-8.6% (that's quite a range). The loan is backed on a property, but you don't have to own the property (it can be owned by a family member).

The loan can be used for any non-commercial purpose, so of course I started thinking about what would happen if I borrowed, say, 15 million yen for twenty years and just put it into a cheap world stock ETF.

Obviously we already have a mortgage so couldn't borrow against our flat, but my in-laws have a paid-off house and might be willing to play along with this.

I popped into the Sendai branch of Tokyo Star Bank, but unfortunately they are not allowed to deal with this type of loan so referred me to the Ikebukuro Branch in Tokyo.

Strike one.

The Ikebukuro Branch got in touch and sent me an information pack and application materials.

Rather than a preliminary application, this was a full application that requires me to submit all the paperwork you might imagine, and also requires the owner of the property to do the same.

A fair amount of work and I still didn't know what the interest rate was likely to be or how much we'd be allowed to borrow.

Strike two.

So I called Tokyo again and asked them to give me an idea of the interest rate and possible loan size based on my situation. Obviously I wasn't going to run around getting documents and talking to my father-in-law if there was a possibility that the bank was going to turn around and offer me 2 million yen at 6% :)

Unfortunately I was told that they couldn't tell me anything until the results of the official credit check, at which point they would offer me an interest rate and confirm how much we could borrow based on the property. After a lot of pushing the person I was talking to confirmed there was a good chance the interest rate would be over 2%.

Strike three. I'm out.

Now, this deal obviously seemed a bit too good to be true. I asked what I'd have to do to get 0.8% but the rep wasn't able to say much more than having a large income and valuable property, along with all the usual credit-check type stuff.

So I suspect this was a classic bait and switch.

Advertise an amazing rate, then after people have gone through all the hassle of the application process offer them a more normal rate and hope they'll take it.

The loan also has a 108,000 yen fee, and I would have had to go to Tokyo to close the deal.

This was an interesting experience, but unfortunately didn't work out this time. How about you? Any good loan stories? What other amazing financial products are out there?

This post first ran on RetireJapan in September 2016