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Classes and Kinds of Credit
Transcript of Classes and Kinds of Credit
the granting of a loan and the creation of debt. It is any form of deferred payment.
BSP Borrowing and Lending Rates
The movement of BSP's borrowing and lending rates reflected its desire to restore stability in the foreign exchange market while ensuring that the level of key policy rates are in line with objectives to bring about a decline in domestic interest rates.
Private sectors of the economy
a. Commercial Credit - to pay off businessmen for funds they borrowed in the purchase of goods for productive or profitable ventures. These are the merchants, distributors.
d.) Consumer Credit - constitutes all obligations to pay off people for the money they borrowed for consumption purposes.
Loans and Discount Function
As a financial intermediary, banks do not only accept deposits but also extend loans. They are the most substantial source of credit not only for individuals and private businesses but also for the government.
Classes and Kinds of Credit
b.) Agricultural Credit - to pay off farmers and farm organization for the funds they borrowed in the acquisition of farm inputs.
c.) Investment Credit - to pay off individuals or business firms for the loans they obtained in buying capital goods. This is also called industrial credit
e.) Speculative Credit - used for dealing in securities or goods with the intention of making a profit through favorable price changes
f.) Export Credit - cash is not paid on or before shipment of goods out of the country
g.) Industrial Credit - intended for financing the needs of industries like logging, fishing, manufacturing and others and which involves big amounts of money.
h.) Real Estate Credit - credit is secured purposely for construction, acquisition, expansion or improvement of real estate properties, it is termed as real estate credit.
Short-term Credit -
a loan which is payable in less than a one year
Long-term Credit -
is a loan whose maturity is from 5 years or more.
Intermediate Credit -
a loan which matures only in more than a year but less than five years
Other Valuable properties
Other Private institutions
Public credit inludes:
and its instumentalities
Private credit refers to:
all grants of credit to non-government
->The commercial banks stand ready to help our businessmen in their need for credit.
->accumulate the necessary amount to pay the interest to their depositor.
->most of their customers are businessmen and their needs for funds are mostly short-term in nature.
Types of Loans Granted by Banks
whether secured or unsecured, are risk-inherent although the former is less risky. Although secured loans are backed by collateral, creditors prefer to have cash rather than a property or asset which still needs to be converted into cash.
Demand or callable loan
does not have a definite maturity and therefore, is subject to payment anytime the bank deems it payable.
type of loan may be a short-term, medium-term, or long term which is payable at a specified future time.
>collateralized loan - payment is longer than one year, the banks requires collateral. It is a secured loan.
>Foreclosure - process of enforcing the lien on the property pledge by selling the property in an auction in order to recover the money lent and all the expenses incurred in the process.
Mortgagor - borrower
Mortgagee - the bank
Other Classifications of Bank loans
According to the form on how credit is granted.
a. Direct loan
b. Discount loan and re discount loan
c. Overdraft line
According to release of the loan
a. Lump sum release
b. Installment release as the project progresses
According to manner of repayment
a. Lump sum basis
Two kinds of Credit according to security
this type depends on some specific thing, legally set aside to guarantee its payment. Banks require collateral like real estate titles to assure payments of debts. The great majority of loans, about 66% granted by commercial banks, are secured loans.
type of credit where the debt or assures payment w/o a particular asset pledged to secure the debt.