Credit Lecture

8/3/2019 Credit Lecture

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CHAPTERS 6 & 7

CREDIT SYSTEMSOURCES OF CREDIT


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REASON FOR CREDIT.

NO MONEY

CONVENIENCE


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Foundationsofa Systemof Credit

Absoluteconfidence

Credit Facilities

MoneyStandardStable

Government


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CREDIT

The ability to obtain a thing of value in exchangefor a promise to pay with money or somethingequally satisfactory to the seller at some future

time

CHARACTERISTIC OF CREDIT

POWER OBLIGATION


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CLASSES AND KINDS OF CREDIT

ACCORDIN

GTO TYPE

CONSUMER CREDIT

RETAIL CREDITCHARGEACCOUNT

INSTA

LLMENT CREDIT

CREDIT CARD


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TRUTH IN LENDING ACT

REPUBLIC ACT 3765Excerpts:1. Cash price or delivered price of property and services acquired

2. The amount to be credited as down-payment

3. The difference between the amount set forth under clauses 1 and2.

4. The charges, individually itemized

5. The total amount to be financed

6. The finance charge in pesos and centavos

7. The percentage that the finance charge bears to the total amount

to be financed.


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MERCHANTILE CREDIT AND

BANK CREDIT

Mercantile creditalso called commercial credit, anextension of time for payment, given by seller ofmerchandise to this customer

Bank creditis govern by the following factors:

Limited transaction

Requirement of collateral or promissory note General working capital purposes

Greater risk management and precaution.

Lesser competition compared to merchantile credit


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BANK CREDITRevolving credit

is a type ofcredit that does not have a fixed

number of payments, in contrast to installmentcredit. Examples of revolving credits used byconsumers include credit cards. Corporate

revolving credit facilities are typically used to

provide liquidity for a company's day-to-dayoperations.


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BANK CREDITInvestment Credit

is utilized by business organization to

purchase fixed assets or to carry minimumbusiness operation, consist of advancesintended for the purchase or construction of

necessary plant and equipment.

Derived from a. funds of individual investors,

trustees of funds of individuals or estates,

insurance companies, banking institutions

and business concerns


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ACCORDING TO MERCHANDISE OR

MONEY

MERCHANDISE CREDITEXAMPLE: APPLIANCE STORE, DEPARTMENT STORE, SARI-SARI

STORE

BORROWINGM

ONEYEXAMPLE: BANKS, COOPERATIVES,PAWNSHOP


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ACCORDING TO PURPOSE

AGRICULTURAL CREDIT

COMMODITY LOANS

EXPORT CREDIT

INDUSTRIAL CREDIT

COMMERCIA

L CREDIT

REAL ESTATE CREDIT


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ACCORDING TO MATURITY

SHORT TERMCREDIT

Payable within one year from date of acquisition.

Purchase of consumer goods, character loan

MEDIUMOR INTERMEDIATE TERMCREDIT

Its maturity ranges from 1 to 5 years. For financing

improvements on firm, e.g. Installment buyingLONG TERMCREDIT

intended for 5 years and beyond; intended forinvestment purposes, plant, machineries,buildings.


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GOVERNMENT OR PUBLIC CREDIT

Pledgingofgoodfaith andthe resourcesofthenationfor the repaymentofa debtincurredonbehalfofthepeople.

P

ublic D

ebtc

onsist

ofa

llc

la

imsa

ga

inst

the

govtwhichmaybepayableingoodsor services,butusuallyin cash.

Obligationsmaybe:

1. Purefinancial2. Services renderedor goodsdeliveredtothe

governmentfor which certificates,notesorevidencesofindebtednesswasissued


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Sources of credits

Individual MoneyLendersRetailStoresPawnshopsCommercial BanksCommercialPaperH

ouseSavingsBankRural BanksDevelopment Banks

Investment BanksSavings and LoanAssociationsFinanceCompaniesCreditUnionsInsuranceCompanies

GSIS

SSS

AFPSLAIPAG-IBIG


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The Cs of Credit

Character

Capacity

Capital

Collateral

Condition Country

Currency


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The Cs of Credit

C


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The Cs of Credit

CONFIDENCE


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THANK YOU

PLEASE BE READY FOR A SHORT QUIZ

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Credit Lecture