Documente Academic
Documente Profesional
Documente Cultură
Consumer
Lending
• Has been among the most popular financial
services offered in recent years
• One of the most important sources of
revenues and deposits for banks and their
competitors (credit unions, savings
associations, and finance and insurance
companies); a source of supplemental
income
• On the other hand, presents a special
challenge due to higher-than-average
default rates.
18-3
Residential Mortgage
Loans
Nonresidential Loans:
Installment
Loans
Short-Term to Medium-Term Loans
Repayable in Two or More Consecutive
Payments, Usually Monthly or
Quarterly. These Are Often Used to
Finance Big Ticket Purchases or
Consolidate Existing Debt
(automobile, furniture, appliances).
18-6
Noninstallment
Loans
Short-Term Loans By Individuals for
Immediate Cash Needs and Repayable
in One Lump Sum When the
Borrower’s Note Matures (charge
accounts, medical care, auto and
home repairs)
18-7
Debit Cards
Characteristics of Consumer
Loans
Application Loan
Credit
Bureaus
• Credit Reporting Agencies or Credit Bureaus
Assemble and Distribute to Lenders the
Credit History of Millions of Borrowers
• Information
▫ Personal Identifying Data
▫ Personal Credit Histories
▫ Public Information That May Have Bearing on
Loan
18-12
Credit Scoring
Real Estate
Loans
• Among the Riskiest Loans Banks Can Make
Risk Risk
Lender's
Loan Rate Nonfunding Premium Premium Desired
Cost of
Paid by = + Operating + for + for Time + Profit
Raising
Consumer Costs Customer to Margin
Funds
Default Maturity
18-18
Simple
Interest
In Simple Interest the Customer Only Pays
Interest On the Amount of the Principal Left.
First the Declining Loan Balance is Calculated
and That Reduced Balance is Used to Calculate
the Amount of Interest Owed
$3,360
$3,000 =
(1+is )
is 12%