High interest rate on bank borrowings

I know of a person who runs a small business. Due to the economic slowdown, his income was reduced, but his family expenses continued to be high.  He had to use an bank overdraft secured on a second mortgage of his house. This overdraft accumulated to $50,000 within two years. He had to pay a high interest rate of 2% a month on the overdraft. The interest cost him $1,000 a month. It was a burden to him, as his income stream has not recovered.

Fortunately for him, he was able to approach a family member for financial assistance to pay off the overdraft, saving him $1,000 a month. Instead, he paid $1,000 a month to repay the loan, free of interest. In this way, he would be able to repay the loan within four years.

The bank pays interest at 0.5% per annum to depositors and charge 24% per annum on loans to borrowers - secured on a second mortgage. It seems that this bank is exploiting the desperation of people who have to borrow to meet their living expenses.

  Tan Kin Lian