Increased Consumer Spending</li></li></ul><li>Credit Card Interest Charges <br />Credit card issuers usually waive interest charges <br />if the balance is paid in full each month, but typically <br />will charge full interest on the entire outstanding <br />balance from the date of each purchase if the total <br />balance is not paid.<br />General Formula:<br /> APR ADB<br /> -------- X -------- X number of days revolved<br /> 100 365<br />
Bank Overdraft Product<br />An overdraft occurs when withdrawals from a bank <br />account exceed the available balance which gives the <br />account a negative balance - a person can be said to <br />be "overdrawn".<br />Types of Overdraft:<br /><ul><li> Authorized Overdraft
Unauthorized Overdraft</li></li></ul><li>Reason of Overdraft <br /><ul><li> Intentional short-term loan :</li></ul>The account holder finds themselves short of money <br />and knowingly makes an insufficient-funds debit. <br />They accept the associated fees and cover the overdraft <br />with their next deposit.<br /><ul><li> Failure to maintain an accurate account register :</li></ul>The account holder doesn't accurately account for <br />activity on their account and overspends through <br />negligence.<br /><ul><li> Bank fees </li></ul>The bank charges a fee unexpected to the account holder, <br />leaving insufficient funds for a subsequent debit from the <br />same account.<br />
Personal Loan <br />Loans available from banks and other financial <br />institutions to private individuals for personal use <br />such as the purchase of a motor vehicle, holiday or <br />similar item are personal loans. Repayment periods <br />vary from one year to five years. <br />Types of Personal Loan:<br /><ul><li> Secured Loan
Unsecured Loan</li></li></ul><li>Home Equity Lending <br />Home equity is the amount of money you <br />have already paid against the value of your home. <br />A simple formula for determining your home equity <br />is to subtract the amount of the mortgage balance <br />from the current fair market value of your home. <br /> In other words, your equity increases as your <br />mortgage balance decreases. If your home has been <br />appraised for $200,000.00 and you owe $125,000.00 <br />on your mortgage, your equity is $75,000.00.<br />
Auto - Title Lending <br />A Auto Title Loan, or simply title loan, is a <br />loan where the borrower provides their auto title <br />as collateral for a loan.<br /> These loans are typically short-term, and tend <br />to carry higher interest rates than other sources of <br />credit. These loans have higher interest rates than <br />other sources of credit due to the fact that the lender <br />typically does not check credit and that the only <br />consideration for the loan is the value and condition <br />of the vehicle.<br />
Informal Lending <br />Informal financing typically consists of small, <br />unsecured, short term loans restricted to rural areas, <br />agricultural contracts, households, individuals or <br />small entrepreneurial ventures. <br />Informal financial institutions rely on relationships <br />and reputation and can more efficiently monitor and <br />enforce repayment from a class of firms than comme-<br />-rcial banks and similar formal financial institutions <br />can… By informal financial institutions, we refer to the<br />entire gamut of non-market institutions such as credit <br />cooperatives, moneylenders, etc. <br />
Peer to Peer Lending <br /> Peer-to-Peer lending and social lending is, in its <br />broadest sense, the name given to a certain breed of <br />financial transaction (primarily lending & borrowing, <br />though other more complicated transactions can be <br />facilitated) which occurs directly between individuals <br />("peers") without the intermediation/participation of <br />a traditional financial institution. <br />Lending is a form of Person to Person Lending which <br />involves intra-group many-to-one or one-to-many <br />credit structures<br />
Peer to Peer Lending <br />Advantage:<br /><ul><li> Lenders get a fixed return.
Borrowers can get loans with or without collateral from these institutions based on the</li></ul> financial strength of the borrowers.<br /><ul><li> Intermediary institutions gains are based on economies of scale and on the spread </li></ul> between the lending and borrowing rates.<br />Disadvantage:<br /><ul><li>Many of these institutions failed and lenders and depositors lost their capital due to </li></ul> failures in the risk management of these institutions.<br /><ul><li> Central banks started evolving deposit guarantee schemes, however the amount of such </li></ul> coverage was for small deposit holders and the large deposit holders were unsecured <br /> creditors for the banks. So in case the banks failed.<br />
Rough Slide (Credit Card) <br />What:<br />A credit card is the system of payment. To borrow money or buy products and services on credit.<br />Who: <br />Bank of America, JP Morgan Chase, Citigroup (which jointly controlled 60% of total credit Card payment as of 2003) & Credit Union.<br />When:<br />Beginning in 1910 previously and In 1949 launch of “Diner’s Club”.<br />Where:<br />Previously initiated by some merchant and after that Diner’s Club allowed cards to be used at multiple retailer.<br />How:<br />Credit cards are issued after an account has been approved by the credit provider, after which cardholders can use it to make purchases atmerchants accepting that card. When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN).<br />Interest Charges<br />For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received.<br />
Rough Slide (Bank Overdraft)<br />Authorised overdraftYou arrange this with your bank in advance and agree a limit up to which you can borrow. The money is drawn from your current account. There is no minimum repayment and you can take the money up to your overdraft limit using any of your usual withdrawal methods.<br />Unauthorised overdraftThis is where you haven’t agreed an overdraft facility with your bank and have drawn more money out than you have in your account, or if you have taken out more than your authorised overdraft's limit. You will pay extra charges if you do this and these can build up.<br />
Rough Slide (Personal Loan)<br />Secured loanThis means that you have to have an asset, for example a home or car that the loan can be secured to. So, if you can’t repay the loan, the lender can sell your asset to get its money back. You may be charged less interest on a secured loan but there may be extra fees.<br />Unsecured loanThe lender doesn’t require that your home or car is used to guarantee the loan, but legally you must still repay the loan. The lender can take court action against you to get its money back, and this could mean you losing your home.<br />
Rough Slide (Informal Lending)<br />we will use the term ‘informal finance’ exclusively to characterize the lender-borrower relationship between friends and relatives and for the most part we will use the terms friends and relatives interchangeably. But we also believe that using the term ‘informal lending’ is disingenuous to what in fact lending amongst friends truly represents.<br />
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