The financial services sector is crucial to a nation's economy as it provides liquidity and the free flow of capital. When strong, the sector allows the economy and companies to grow while boosting consumer confidence and purchasing power. However, if the sector fails it can drag the economy into recession by restricting lending and capital. Customer credit encompasses both open-ended revolving credit like credit cards as well as closed-ended installment loans for specific purposes and time periods. Individuals can obtain customer credit from commercial banks, savings and loans, credit unions, pawn brokers, or sometimes family and friends, but must demonstrate good character, capital, capacity to repay, available collateral, and meet other creditor conditions.
The financial services sector is crucial to a nation's economy as it provides liquidity and the free flow of capital. When strong, the sector allows the economy and companies to grow while boosting consumer confidence and purchasing power. However, if the sector fails it can drag the economy into recession by restricting lending and capital. Customer credit encompasses both open-ended revolving credit like credit cards as well as closed-ended installment loans for specific purposes and time periods. Individuals can obtain customer credit from commercial banks, savings and loans, credit unions, pawn brokers, or sometimes family and friends, but must demonstrate good character, capital, capacity to repay, available collateral, and meet other creditor conditions.
The financial services sector is crucial to a nation's economy as it provides liquidity and the free flow of capital. When strong, the sector allows the economy and companies to grow while boosting consumer confidence and purchasing power. However, if the sector fails it can drag the economy into recession by restricting lending and capital. Customer credit encompasses both open-ended revolving credit like credit cards as well as closed-ended installment loans for specific purposes and time periods. Individuals can obtain customer credit from commercial banks, savings and loans, credit unions, pawn brokers, or sometimes family and friends, but must demonstrate good character, capital, capacity to repay, available collateral, and meet other creditor conditions.
The financial services sector is crucial to a nation's economy as it provides liquidity and the free flow of capital. When strong, the sector allows the economy and companies to grow while boosting consumer confidence and purchasing power. However, if the sector fails it can drag the economy into recession by restricting lending and capital. Customer credit encompasses both open-ended revolving credit like credit cards as well as closed-ended installment loans for specific purposes and time periods. Individuals can obtain customer credit from commercial banks, savings and loans, credit unions, pawn brokers, or sometimes family and friends, but must demonstrate good character, capital, capacity to repay, available collateral, and meet other creditor conditions.
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CBIT- THE SCHOOL OF MANAGEMENT
SMS
NAME : M. NAVEEN KUMAR
ROLL NO : 160121672113 Class : MBA II YEAR SEC : B TOPIC : TYPES OF FINANCIAL SERVICES: CUSTOMER CREDIT 1. TYPES OF FINANCIAL SERVICES : CUSTOMER CREDIT
A . Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual ...
The Importance of the Financial Services Sector :
The financial services sector is the primary driver of a nation's economy. It
provides the free flow of capital and liquidity in the marketplace. When the sector is strong, the economy grows, and companies in this industry are able make better to manage risk. The strength of the financial services sector is also important to prosperity of a country's population. When the sector and economy are strong, consumers generally earn more. This boosts their confidence and purchasing power. When they need access to credit for large purchases, they turn to financial services sector to borrow.
If the financial services sector fails, though, it can drag a country's economy down. This can lead to a recession. When the financial system starts to break down, the economy starts to suffer. Capital begins to dry up as lenders tighten the reins on lending. Unemployment rises, and wages may even drop, leading consumers to stop spending. In order to compensate, central banks lower interest rates to try to boost economic growth. This is primarily what happened during the financial crisis that led to the Great Recession. Customer Credit : Consumer credit is personal debt taken on to purchase goods and services. A credit card is one form of consumer credit. Although any type of personal loan could be labeled consumer credit, the term is more often used to describe unsecured debt that is taken on to buy everyday goods and services. However, consumer debt can also include collateralized consumer loans like mortgage and car loans.
If your business gets into trouble by incurring too much debt, this will likely affect the business's profitability, which will in turn likely affect your ability to qualify for personal credit. The flip side of this can also be true: If you are over-burdened with personal debt, your business creditors (who can be expected to ask for your personal guarantee on loans made to your small business) may be less willing to extent credit to your business if they think your personal guarantee to be of little or no value.
TYPES OF CUSTOMER CREDIT :
Open-end (revolving) : With open-end, or revolving credit, loans are made on a
continuous basis as you purchase items, and you are billed periodically to make at least partial payment. Using a credit card issued by a store, a bank card such as VISA or MasterCard, or overdraft protection are examples of open-end credit.
There is a maximum amount of credit that you can use, called your line of credit. Unless you pay off the debt in full each month, you will often have to pay a high- rate of interest or other kinds of finance charges for the use of credit. Closed-End (installments) : This form of credit is used for a specific purpose, for a specific amount, and for a specific period of time. Payments are usually of equal amounts. Mortgage loans and automobile loans are examples of closed-end credit. An agreement, or contract, lists the repayment terms, such as the number of payments, the payment amount, and how much the credit will cost. With closed- end credit, the seller retains some form of control over the ownership (title) to the goods until all payments have been completed. For example, a car company will have a "lien" on the car until the car loan is paid in full.
Sources for customer credit :
1. Commercial banks : Commercial banks make loans to borrowers who have
the capacity to repay them. Loans are the sale of the use of money by those who have it (banks) to those who want it (borrowers) and are willing to pay a price (interest) for it. Banks make several types of loans, including consumer loans, housing loans and credit card loans. 2. Saving and loans : As depicted in It's a Wonderful Life, savings and loan associations used to specialize in long-term mortgage loans on houses and other real estate. Today, S&Ls offer personal installment loans, home improvement loans, second mortgages, education loans and loans secured by savings accounts. 3. Credit unions : Credit Unions are nonprofit cooperatives organized to serve people who have some type of common bond. The nonprofit status and lower costs of credit unions usually allow them to provide better terms on loans and savings than commercial institutions. The costs of the credit union may be lower because sponsoring firms provide staff and office space, and because some firms agree to deduct loan payments and savings installments from members' paychecks and apply them to credit union accounts. 4. Pawn brokers : The pawnbrokers are unconventional, but common, sources of secured loans. They hold your property and lend you a portion of its value. If you repay the loan and the interest on time, you get your property back. If you don't, the pawnbroker sells it, although an extension can be arranged. Pawnbrokers charge higher interest rates than other lenders, but you don't have to apply or wait for approval. 5. Family & friends : Your relatives can sometimes be your best source of credit. However, all such transactions should be treated in a businesslike manner; otherwise, misunderstandings may develop that can ruin family ties and friendships.
TO AVAIL A LOAN 5’C ARE IMPORTANT :
1. Character 2. Capital 3. Capacity 4. Collateral 5. Conditions Reference : The management of consumer credit : theory and practice https://amzn.eu/d/69qawzv Search engine : Investopedia.com https://www.investopedia.com/ask/answers/what-is-finance/
