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Chapter 6 Introduction To Consumer Credit
Chapter 6 Introduction To Consumer Credit
Chapter 6 Introduction To Consumer Credit
Increasing level of credit in EconomyBasically the young generation has added to the growth of
consumer credit. Without consideration of debit limit they
uses the credit over electronic appliances, clothing,
furniture, automobiles.
Uses and misuses of creditUsing credit may make a consumer more efficient or give
enjoyable life. There can be some valid reasons to use
credits like basic need or education purposes.
Advantages Of Credit:
Enables a person to enjoy goods and services.
Credit
Disadvantages Of Credit
Temptation to overspend, especially during period of
necessary.
Remove your name from junk mail,
telemarketing lists.
Protect yourself by shredding old credit slips,
account statements, and credit offers you
receive in the mail.
TYPES OF CREDIT
CLOSE ENDED CREDIT: One time loan that the
borrower pays back in a specified period of time and in
payment of equal amounts. Eg. home loan, automobile
loan
Three typesInstallment sales credit:
Installment cash credit:
Single lump sum credit:
interest rates
Cobranding: Eg star bazaar hsbc Cobranding
Debit cards: ATM cards used for withdrawal and for
purchases
MeasuresSign immediate
store them at secure place
Dont give no on phone lines
Dont write no's anywhere
Remember to get card receipts after transaction
If billing incorrect than inquire
If dont receive billing statement notify complain
immediately
CAN YOU AFFORD A LOANBy proper assessment of budget plan decide of credits.
If the installment is less than saving then a person can
afford it.
liability
net worth
Five Cs
Character: borrowers attitude towards credit obligation
Capacity: financial ability of a borrower to meet financial
obligation
Capital: the net worth of assets of the borrower
Collateral: a valuable asset that is pledged to ensure loan
payment
Conditions: general economic condition that affect the ability
to repay the loan.
Age: ECOA very specific about the age.
Housing loans: taken into consideration if any for
granting other credit. Based on these factors credit is
given to applicant.
LAWS
Truth in lending act
Equal credit opportunity act
Fair credit billing act
Fair credit reporting act