Basic Finance

• are those credits obtained for one’s use.

  Personal Credit
• 3 Types of personal credits

  • Service credit
  • Retail credit
  • Personal loan credit
• those obtained from doctors, lawyers, dentists, and other professionals. These professionals usually bill us for their services.

  Service credit
• are goods obtained mostly on retail and they fall under 3 categories:

  Retail credit or consumer’s credit
• your are charge the goods you obtained on credit and you usually pay within 15 to 20 days after you are billed.

  Regular charge account
• the credit is not paid in full within this period but is monthly installments.

  Revolving charge
• the debt is paid off over a certain period of time, it is however requires most of the time a down payment. secured by a chattel mortgage

  Installment plan
• differs from other forms of consumer credit in that cash or money is given as credit instead of goods and services.

  Personal loan credit
• It is obtained purposely for the acquisition, improvement, and expansion of real properties. Ex: SSS, GSIS, PAG-IBIG

  Real Estate credit
• Criteria for Granting Personal Credit

  • Employment & personal resources are the best criteria
  • Wealth & accumulated resources are the primary factors in determining the basis of personal credit.
  • Occupation is also important because some kinds of occupation are better risk than others.
  • Length of employment and its permanence is also used in determining a credit risk.
• is an act designed to protect consumers against unfair billing practices of people who extend extend credit to a purchaser of goods on installment basis.

  The law requires creditors to furnish each customer the following information before transaction is consummated

  Truth in Lending Act
• are credits extended by one businessman to another businessman

  Commercial or Mercantile Credits
• • Manufacturers extend a mercantile credit to a wholesaler, and wholesalers to retailers.
  • They are in the form of goods

  Merchandise credits or Trade credits
• takes place from the time goods are sold as raw materials to the time they reach the industrial consumer,

  A commercial credit transaction
• is generally an unsecured short-term type of credit. With the exception of retailers.

  Commercial Credit
• • are credits granted by banks to businessmen to finance their short-term credit needs.
  • Commercial banks usually grant these loans to finance current business operations

  Bank Credits or Bank Loans
• • Export credits are obtained to finance the selling of goods outside the country
  • Import credits are also obtained to finance the buying of goods from other countries.

  Export and Import Credit
• • Long-term borrowing is one of the most common forms of financing used by business enterprises.
  • When a business prefers to acquire funds by entering into a long-term borrowing arrangement.

  Investment Credit
• are credits given to farmers for the development, improvement and cultivation of their lands. They may be in the form of a:

  Agricultural Credit
• this loan is given to farmers for the purpose of financing the production crop like rice, corn, peanuts, soybeans, etc. Here the farmer cannot sell his crops unless he notifies his creditor

  Crop Loan
• this loan is obtained to finance the raising of pigs chickens, ducks, goats, and other animals for breeding purposes

  Livestock Loan
• This loan is used to finance the development and improvement of the farmland. Collaterals are usually land and farm equipment.

  Agricultural Time Loan
• This loan is obtained to finance the selling and distribution of farm crops, which are kept in a warehouse and evidenced by warehouse receipts.

  Commodity Loan
• are loans granted to industries to finance the acquisition of equipment and machineries to finance the construction of a plant or factory and to some extent to finance the purchase of raw materials for manufacturing capital goods or goods for consumption purposes

  Industrial Credit
• are loans to finance the purchase and improvement of real properties like a house or a building.

  Real Estate Credit
• are credits obtained from any of the government institutions or their instrumentalities.

  Government or Public Credit
• are those credits which are covered by properties of value called collaterals to guarantee loans.

  Secured credits
• is one where the borrower has merited the full trust and confidence of the creditor

  Unsecured credit / character loan / clean loan
• are those loans payable within a year

  Short-term loans
• are payable from one year to five years

  Medium-term loans / intermediate term loa
• are loans payable beyond five years and usually up to 15 to 20 years

  Long-term loans
• are loans whose interest payments are made at the time the loan matures.

  Direct loans
• are those loans where interest payments are deducted at the time the loans are granted.

  Discount loans
• is an agreement between the debtor and the creditor wherein the debtor is allowed to obtain funds from the creditor up to a certain amount.

  Credit line
• is one which the debtor is allowed to draw funds from the creditor up to an amount agreed upon and the funds drawn when paid can be borrowed again.

  Regular credit line
• the borrower can obtain funds from the creditor up to a certain amount agreed upon.

  Maximum Loan Commitment
• in which the bank allows its depositors to draw from the bank beyond their actual deposits

  Overdraft Line
• are the most common source of credit. Most of the commercial credits including industrial & agricultural credits are obtained from the banks

  Banks
• specializes in giving commercial loans to businessmen.

  The commercial banks
• It is organized for the purpose of encouraging the thriftiness among the people.

  savings and mortgage bank