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7/29/2019 Sources of Consumer Credit in India FP
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Prepared by: Guided by :
Sankaliya Harikrushna (61) prof. Pinakin jaiswal
patel Binita(62)
Fin: BGroup no: 31
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Meaning
The term Consumer credit refers the activitiesinvolved in granting credit to consumer to enable themto possess/ own goods meant for every day use
Also known by several names: Credit merchandising/deferred payment/ installment buying /hire purchase/pay- out- of income scheme/ easy payment/ credit
buying/ installment credit plan, etc
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Definition the term consumer credit refers to a transfer of
wealth, the payment of which is deferred in wholepart, to future, and is liquidated piecemeal or insuccessive fractions under a plan agreed upon at thetime of transfer.
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Advantages of credit Current use of goods and services.
Permits purchase even when fund are low.
A cushion for financial emergencies.Advance notice of sales.
Easier to return merchandise.
Convenient when shopping.
One monthly payment.
Safer than cash.
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Advantages of credit Needed for hotel , reservations and shopping online.
To take advantage of float time/grace period.
Indicates financial stabilty.
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Disadvantages of consumer credit Temptation of overspend
Can create long term financial problems, slow
progress toward financial goals. Potential loss of merchandise due to late or non
payment.
Ties up future income.
Credit cost money more costly than paying with cash
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Sources of Consumer Finance Traders
Commercial Banks
Cash Credit Institutions NBFCs
Other sources
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Traders
Includes sales finance companies, hire purchase & andother financial institutions
Commercial Banks:
provides direct or indirect finance the consumer
durables Banks lend large sum of money at wholesalerate to commercial or sales finance companies, andother such intermediaries Personal loans are alsogranted without security
Credit Card Institutions:
Arranges credit purchase facility for consumer articlesthrough respective banks which issue credit cardEnables to buy g & s on credit
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NBFCs:
Also know as small loan companies or licensedlenders or personal finance companies. Chargessubstantially high rate of interest than market ratesLast resort to consumers
Other Sources:Savings and
Loan Associations
Mutual savings Bank
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SBI 9.75%
Central bank of India 10.50%
LIC hosing 10.25% Department credit bank 11.25%
General provident fund 8.8%
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STATUS OF CONSUMER CREDIT IN
INDIA1. Housing Loans- Housing loans are primarily taken for
the sake of financing building of new houses, purchaseof new houses, purchase of old houses or for repairing
an existing house.2. Personal Loans - Personal Loans can be claimed for
absolutely any purpose.
3. Consumer Durable Loans- Consumer durable loans
can be claimed for the purchase of consumer durablessuch as televisions, music systems, refrigerators, etc.
4.Vehicle Loans-Vehicle loans, as the name suggestscan be claimed for the purchase of vehicles.
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5. Educational Loans- Educational loans can be claimed
for the purpose of either undergraduate orpostgraduate education in either India or abroad.
6. Credit cards
7. Travel Loans- Travel loans can be claimed as the namesuggests for the purpose of meeting travelexpenditures
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Types of credit
Closed-end credit Closed-end credit is used for a specific purpose, for a
specific amount, and for a specific period of time.Payments are usually of equal amounts. Mortgage
loans and automobile loans are examples of closed-end credit. An agreement, or contract, lists therepayment terms, such as the number of payments,the payment amount, and how much the credit willcost. Generally, with closed-end credit, the sellerretains some form of control over the ownership (title)to the goods until all payments have been completed.For example, a car company will have a "lien" on thecar until the car loan is paid in full
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Open-endcreditWith open-end, or revolving credit, loans are made on
a continuous basis as you purchase items, and you arebilled periodically to make at least partial payment.Using a credit card issued by a store, a bank card suchas VISA or MasterCard, or overdraft protection areexamples of open-end credit. There is a maximumamount of credit that you can use, called your line of
credit. Unless you pay off the debt in full each month,you will often have to pay a high-rate of interest orother kinds of finance charges for the use of credit
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