M10: Consumer Loan

• A consumer loan is a type of loan in which you take on a personal debt to pay for goods or services. In the Philippines, common types of consumer loans that are offered by banks are auto loans, motorcycle loans, and home loans.
• Consumer loan are provided to people for such critical circumstances which may occur at anytime. You need cash but you don’t want to borrow from your relatives. For emergency, when you need a huge amount of money and this will also help you for your personal needs. It is a loan given to consumer to finance specific types of expenditures. In other words, a consumer loan is any type of loan made to consumer by a creditor .
• is a loan given to consumers to finance specific types of

  expenditures.

  Consumer Loan
• In other words, it is any type of loan made to consumer by a creditor. The loan can be secured (backed by the assets of the borrower) or unsecured (not backed by the assets of the borrower).
• Consumer loans are used to finance expensive purchases.
• Without consumer loans, many people would be unable to purchase a home or car. Students can pay for college and not have to repay the loan until they have completed school. Credit cards are convenient and are a great way to help build credit.
• Types of Consumer Loans

  Home Mortgage

  Personal Loan

  refinance Loan

  Auto Loan

  Credit Card

  Student Loan
• A mortgage is a loan used to purchase a home. Borrowers typically put a small percentage of the purchase price down in cash, and the remaining balance is financed through a bank or lending institution.

  Home Mortgage
• are unsecured loans given to consumers with short loan terms, usually between 18-60 months. Interest rates on personal loans are usually higher than secured loans like home equity loans but lower than credit cards.

  Personal Loan
• are unsecured loans given to consumers with short loan terms, usually between 18-60 months. Interest rates on personal loans are usually higher than secured loans like home equity loans but lower than credit cards.

  Personal Loan
• When you get a new loan to pay off an existing loan is known as refinancing. You can refinance most types of loans, but mortgage refinancing is the most common. There are many reasons one would want to refinance their loan. Usually, it is to get a lower interest rate or monthly payment.

  Refinance Loan
• When you get a new loan to pay off an existing loan is known as refinancing. You can refinance most types of loans, but mortgage refinancing is the most common. There are many reasons one would want to refinance their loan. Usually, it is to get a lower interest rate or monthly payment.
• a type of loan that allows you to borrow money from a lender and use it to purchase a car.

  Auto Loan
• A vehicle is often the second-largest purchase most consumers make. It is just not possible for most to pay cash for a depreciating asset like a car.  
• small plastic card issued by a bank, business, etc., allowing the holder to purchase goods or services on credit.

  Credit Card
• Interest rates for credit cards are typically quite high, but you are only charged interest on the amount you borrow. If you’re able to pay off the full balance each month, you will not pay any interest at all.
• receives from a private company, which they can use toward tuition or other school expenses. However, they must pay that money back after graduation, plus interest

  Student Loan
• Student loan payments are usually deferred until you complete college. Payments can be stretched out over several years, making the monthly payments relatively small.
• Categories of Loans

  Open-end loan and Closed-end loan
• An open-end consumer loan also known as revolving credit, it is a loan that the borrower can use for any type of purchases but must pay back a minimum amount of the loan, plus interest, before a specified date. Example is credit card.


  Open-end loan
• also known as installment credit, it is used to finances pecific purchases. The consumer makes equal monthly payments over a period of time.

  Closed-end loan
• Closed-end loan is also known as installment credit.
• Sources of Consumer Loans

  Commercial Banks

  Credit Unions

  Savings and Loan Associations

  Pawnbrokers

  Family and Friends
• Consumers loans can be obtained from a number of sources, including commercial banks, consumer finance companies, credit unions, sales finance companies, and life insurance companies even pawnshops, or friends and relatives.


  Sources of Consumer Loans
• is a financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit. It offer various types of loans at attractive rates of interest.

  Commercial Banks
• Commercial banks are a popular source of consumer loans. One nice thing about commercial banks is that they typically charge lower rates than most other lenders, largely because they take only the best credit risks and are able to obtain relatively inexpensive funds from their depositors.
• are the deposit-type institution that serves members who have a common bond, such as working for the same employer. Offer some of the best credit terms available to their members.

  Credit Unions
• Credit unions can offer favorable loan terms for three reasons:

  ● First, as a deposit -type financial institution, the credit union has deposits on hand from which loans can be made.

  ● Second, many credit unions are nonprofit, cooperative entities.

  ● Finally, credit unions are characterized by low expenses
• lend to credit worthy people, and usually collateral may be required. The loan rates vary depending on the amount borrowed, the payment period and the collateral. The interest charges are generally lower than those of some other types of lenders because they lend depositors money.

  Savings and Loan Associations
• 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, they sell it, although an extension can be arranged.

  Pawnbrokers
• your relatives can sometimes be your best source of credit. However, all such transactions should be treated in a business, like manner. Misunderstandings may develop that can ruin family ties and friendships

  Family and Friends
• With a consumer loan, you receive all the money the lender has approved for you in one lump sum. This is called the principal. Then, to pay the lender back, you need to make equal monthly payments, called installments, for a fixed period of time, until the loan is paid off.

  
  

  Because it’s cheaper to borrow money, consumers take more loans and purchase more goods and services. For qualified borrowers, consumer loans serve a multitude of purposes and are essential in helping them.