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. Last Updated: 07/27/2016

Instant Credit Helps Drive Shopping Frenzy

The ancient refrigerator in your apartment has just died, but you cannot spare an extra $1,000 for a fancy new one at the moment. But before your stock of pelmeny has time to melt, many Moscow stores will let you take that new fridge home for one-tenth of the price. Although you are sure to pay extra as the interest accumulates on the remainder, instant or express credit offered by many Russian retailers can be a convenient option.

Numerous retail chains have teamed up with banks to provide instant credit options on the spot in stores. According to Home Credit bank, household appliances were the favorite purchase to buy on loan, followed by audio/video equipment, cell phones, computers and furniture.

Different banks offer credit ranging from 3,000 rubles ($104) to 200,000 rubles ($6954), with or without down payment, for periods ranging from three months to two years, with advertised annual interest rates of 10 percent and higher. Big chains often work with several banks at a time, offering a variety of loan programs.

To accommodate requests for instant consumer loans, bank representatives set up their own desk at the store, where customers can hand in a preliminary receipt with a price quote, printed out by a salesperson on request. The bank takes down the buyer's information, including employment details (position, earnings, exact legal name of the organization, and work phone numbers). Shops require for purchases a Russian passport with valid local registration and a second ID such as a driver's license or a health insurance policy.

After a brief wait (Rosbank advertises approval in 30 minutes, Delta Bank promises 15 minutes, and Alfa Bank representatives in two different stores gave estimates of 15 to 20 minutes), the bank employee receives an approval or rejection from the bank headquarters. To make a decision, lenders use a scoring system that assigns points for each answer given on the application. Customers who score the necessary amount of points are approved. There are no explanations given for rejections.

Upon receiving approval, the bank official prints out all the necessary papers to be presented to the sales staff and explains the terms of service and the payment schedule. Payment options differ from bank to bank and include direct payments at branch offices, wiring money from post offices, ATM deposits, phone transfers and internet transfers.

Home Credit bank, which offers more than 25 instant credit options, evaluates its potential market in Russia at around 60 million people. In the three years that the bank has been offering instant loans, 5 million customers have taken advantage of this credit option, Home Credit said.

Tekhnosila, an electronics and home appliances giant that has been offering instant credit to its customers since 2002, works with five different banks, said spokeswoman Karina Chernikova. She said that their offer of no-interest credits, where the store pays back the interest on the loan to the bank, was especially popular.

"We use it as our competitive advantage," she said.

Other big chains that provide instant credit include M.Video, MIR, Eldorado, Evroset and IKEA. Large electronics and appliance shopping centers, like Gorbushkin Dvor and Savyolovsky, house instant credit desks that service multiple stores inside the center.

IKEA, which has teamed up with Delta Bank, has provided the service since 2002 and plans to have it in all its future stores in Russia, an IKEA spokesperson said. The store asks its loan-seeking customers to first make a list of desired merchandise, and then it grants the loan for a specific purchase.

Some banks, such as Alfa Bank and Delta Bank, issue credit cards that can be used to repay the loan at ATMs and for further credit purchases once some or all of the loan is repaid.

As a rule, foreigners cannot apply for instant loans, even those who permanently reside in Russia. Dmitry Vechkanov, of Rosbank's retail department, said that although there were no legal obstacles to providing loans to customers holding non-Russian passports, banks viewed such credits as carrying higher risk than those extended to Russian citizens.

"Our bank aims at a long-term relationship with clients, targeting people who live at home rather than coming here for a short term," he added.

Home Credit said that they required customers to be permanently registered in an area near the store in which applicants were requesting a loan. The creditor's web site names Russian citizenship as one of the prerequisites.

Daniel Podolsky, a system administrator, said his application in a St. Petersburg store for a 10-month loan for an urgently needed washing machine was speedily approved.

"I filled out a questionnaire, [the in-store bank clerk] sent it to the bank, and the bank replied in two minutes that they're giving me the loan," Podolsky said.

Not all experiences are as positive, however. Maria Ponomaryova, a book reviewer, remembered as "dreary and nerve-racking" her two-day long instant credit ordeal in August, which involved long waits and unexplained rejections by two banks. She finally got approval by Russky Standart and bought her new laptop at a Savyolovsky computer market at a 20 percent interest rate.

The Russian point-of-sale credit market was born in 2000, when Russky Standart pioneered its consumer credit service.