Different loans subscribed by the consumers.

1. The use of
credit cards,
loans and
money
borrowing
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THE USE OF CREDIT
CARDS
The primary purpose of a credit card
is to allow users to make purchases
without having to pay the full amount up
front. Instead, the user can borrow
credit from a financial institution and
pay it back at the end of the month or
overtime on EMI but with an interest.

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Credit cards are part of
everyday life. They let you carry
less cash, pay for things with a tap
or a swipe, and shop online. But
this convenience can come at a
cost. The trick is to use your
credit card wisely, and pay it back
on time.

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A credit card is a type of payment card which the cardholder
can use to buy items on credit granted by a credit card
company. When you pay by credit card, the credit card
company acts as a buffer between your money and the seller.
IS IT REALLY IMPORTANT TO HAVE CREDIT
CARDS?
- Credit cards can help you improve your credit
score, but only if you use them responsibly. Your
payment history and borrowing amount are the two
biggest factors in your credit score. Secured credit
cards are an option for borrowers with a poor credit
history.

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A credit card is an account that lets you
borrow money to pay for everyday purchases
such as gas and groceries. It can also be a
great resource for purchasing big-ticket items
such as TVs, travel packages, and jewelry
because the funds for these items aren’t
always immediately at your disposal.
The advantages of credit card spending may
include earning rewards, traveling, handling
emergencies or unplanned expenses, and
building credit.

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Loans

7. • Loan in simplest terms can be explained as a thing that
is borrowed, especially a sum of money that is expected
to be paid back with Interest.
• The act of giving money, property or other material
goods to a another party in exchange for future
repayment of the principal amount along with interest
or other finance charges is called loan.
• A loan may be for a specific, one-time amount or can be
available as open-ended credit up to a specified ceiling
amount.
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9. • A secured loan is a loan in which the borrower
pledges some asset (e.g. a car or property) as collateral.
• Secured loans are loans that rely on an asset as
collateral for the loan.
• In the event of loan default, the lender can take
possession of the asset and use it to cover the loan.
• Interests rates for secured loans may be lower than those
for unsecured loans.
• The asset may need to be appraised before you can
borrow a secured loan.
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10. • Unsecured loans don’t have asset for collateral. These
loans may be more difficult to get and have higher interest
rates.
• Unsecured loans rely solely on your credit history and your
income to qualify you for the loan.
• In case of default, the lender has to exhaust collection
options including debt collectors and lawsuit to recover the
loan.
• For example-
 credit card debt
 personal loans
 bank overdrafts
 credit facilities or lines of credit
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11. • Open-ended loans are loans that you can borrow
over and over.
• Credit cards and lines of credit are the most common
types of open-ended loans.
• With both of these loans, you have a credit limit that
you can purchase against.
• Each time you make a purchase, your available credit
decreases.
• As you make payments, your available increases
allowing you to use the same credit over and over.
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12. • Closed-ended loans cannot be borrowed once they’ve
been repaid.
• As you make payments on closed-ended loans, the
balance of the loan goes down.
• However, you don’t have any available credit you can
use on closed-ended loans.
• Instead, if you need to borrow more money, you’d have
to apply for another loan.
• Common types of closed-ended loans include mortgage
loans, auto loans, and student loans.
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13. Term
Loan
Personal
Loan
Home
Loan
Property
Loan
Vehicle
Loan
Education
Loan
Gold
Loan
Business
Loan
Consolidated
Loan
Pay Day
Loan
Policy
Loan
Construction
Equipment
Loan
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14. TERM LOANS
• A term loan is simply a loan provided for business purposes that
needs to be paid back within a specified time frame.
• It typically carries a fixed interest rate, monthly or quarterly
repayment schedule - and includes a set maturity date. It is secure
type of loan.
• A secured term loan will usually have a lower interest rate than an
unsecured one.
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15. Term
Classification
Long Term
(<3years)
Medium Term
(1-3 years)
Short Term
(1 year)
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16. • A personal loan is typically issued for a specific amount
and can be used for various purposes at the discretion of
the borrower.
• A personal loan can be a secured loan or an unsecured
loan. A secured loan uses an asset — such as a house or car
— as collateral (or support).
• If the borrower defaults on the loan, the creditor can take
the asset.
• An unsecured loan does not require collateral and is
considered high risk. As such, it has a higher interest rate.
PERSONAL LOAN
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17. CONSOLIDATED LOANS
• Debt consolidation is a widely used term that can imply
the use of a number of different debt assistance plans that
combine multiple debts, loans or payments.
• There are three main types of debt relief options available:
 Debt Consolidation Loans,
 Student Loan Consolidation,
 Debt Management Plans and Debt Settlement.
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18. • Things debt consolidation can do:
Lower your interest rates Lower your monthly payments
Protect your credit rating Help you get out of debt faster
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19. EDUCATION/STUDENT LOAN
• A loan offered to students which is used to pay
off education-related expenses, such as college tuition,
room and board at the university, or textbooks.
• Many of these loans are offered to students at a lower
interest rate, such as the Perkins loan or Stafford loan.
• In general, students are not required to pay back these
loans until the end of a grace period, which usually begins
after they have completed their education.
• One of the major benefits of these types of loans is that
they come with low interest rates and do not require
collateral or a credit check.
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20. VEHICLE LOAN
• Most people today need a loan when they buy a new or
used car. And the high cost of many cars means that
consumers spend years paying for their vehicles.
• Because a car loan is such a huge debt for most people, it
pays to understand it before entering into an agreement.
• A car loan is a secured loan, which means the vehicle
serves as collateral on the debt.
• If you fail to make your payments, the lender can seize it
as payment.
• This is much safer for the lender than unsecured debt,
such as a credit card account, where the lender has only
the card-holder’s promise to pay
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21. GOLD LOAN
• It is a form of debt financing whereby a potential gold
producer borrows gold from a lending institution, sells the
gold on the open market, uses the cash for mine
development, then pays back the gold from actual mine
production.
• Gold loans had less appeal in the 1990s as mining
companies were offered other increasingly sophisticated
financial instruments, such as forwards and options, by the
bullion banks.
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22. POLICY LOAN
• A loan issued by an insurance company that uses the cash
value of a person's life insurance policy as collateral.
• Traditionally, these were loans issued at a very low interest
rate, but that is no longer universally true.
• If the borrower fails to repay the loan, the money is
withdrawn from the insurance death benefit.
• Sometimes referred to as a "life insurance loan."
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23. LOAN AGAINST PROPERTY (LAP)
• The individual takes the loan by mortgaging the house
property. It is a Secured loan
• One of the cheapest retail loans after home loans;
usually about 12%-16%.
• Since the rate of interest is lower, frequently LAP
Equated Monthly Installments (EMI) turn out cheaper.
• Maximum loan eligibility is determined primarily by the
value of the property and income.
• The Maximum loan tenure for LAP is up to 15 years (180
months).
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24. • The home loan is a loan advanced to a person to assist in
buying a house or condominium.
• Purchasing a house can be a valuable form of investment.
• However, it requires considerable thought and
careful financial planning before taking on such a big step.
• If owning a house is part of your financial goal, then you’ll
need to know whether you can afford from your income and
savings.
HOME LOAN
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25. PAY DAY LOAN
• Payday loans are short-term, high-interest loans
designed to bridge the gap from one paycheck to the
next.
• They are predominantly used by repeat borrowers
living paycheck to paycheck.
• Because of the loans’ high costs, the government
strongly discourages their use.
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26. CONSTRUCTION EQUIPMENT LOAN
• Construction Equipment loans are provided for purchase
of both new and used equipment like excavators, backhoe
loaders, cranes, higher end construction equipment etc.
• The tenure of such loans vary from 12 to 60 months
depending upon the deal and nature of repayment
capacity.
• This is usually a secured loan where the machine itself is
hypothecated until the loan is repaid.
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27. BUSINESS LOAN
• Businesses require an adequate amount of capital to fund
startup expenses or pay for expansions.
• As such, companies take out business loans to gain the
financial assistance they need.
• A business loan is debt, that the company is obligated to
repay according to the loan’s terms and conditions.
• According to the U.S. Small Business Administration,
before approaching a lender for a loan, it is imperative for
the business owners to understand how loans work and
what the lender will want to see from the owner.
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29. Capital
Character
Collateral
Capacity
To
Repay
4 C
Concept
The 4 C's of Credit for Loans
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30. • Character refers to the financial history of the borrower;
that is, whet kind of "financial citizen" is this person or
business?
• Character is most often determined by looking at the
credit history, particularly as it is stated in the credit
score (FICO score).
• Factors that will affect the credit score include:
 Late payments
 Delinquent accounts
 Available credit
 Total debt
• The fewer the problems, the higher the credit score.
• A high personal credit score (over 700) may be the most
important factor in getting a business loan.
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31. • Capacity refers to the ability of the business to generate
revenues in order to pay back the loan.
• In other words capacity measures a borrower's ability
to repay a loan by comparing income against
recurring debts.
• Since a new business has no "track record" of profits, it is
riskiest for a bank to consider.
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32. • Capital refers to the capital assets of the business.
• Capital assets might include machinery and equipment
for a manufacturing company, as well as product
inventory, or store or restaurant fixtures.
• Banks consider capital, but with some hesitation, because
if your business folds, they are left with assets that have
depreciated and they must find someplace to sell these
assets, at liquidation value.
• You can see why, to a bank, cash is the best asset.
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33. • Collateral is the cash and assets a business owner pledges
to secure a loan.
• In addition to having good credit, a proven ability to make
money, and business assets, banks will often require an
owner to pledge his or her own personal assets as security
for the loan.
• Banks require collateral because they want the business
owner to suffer if the business fails.
• If an owner didn't have to put up any personal assets, he or
she might just walk away from the business failure and let
the bank take what it can from the assets.
• Having collateral at risk makes the business owner more
likely to work to keep the business going, as banks reason
it.
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