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COLLECTION
Financial management 402
CONCEPTS OF CREDIT
B. Lender’s Viewpoint
credit is the trust and confidence of the lender
on the borrower’s ability and willingness to pay.
DIFFERENT VIEWPOINTS
ON CREDIT
C. Economist’s Viewpoint
credit is the exchange of actual reality
Against the future probability.
D. Legalistic Viewpoint
credit creates a legal right in favor of
the creditor against debtor who is under
obligation to pay.
FUNCTIONS OF CREDIT
medium of exchange
facilitates the production &consumption
of goods and usually results in the growth
of the economy
Tendency to elevate the moral
standards of the people
Induces people to save
FUNCTIONS OF CREDIT
Enables businessmen & corporations to
Gather large amounts of capital to
undertake large-scale production
Allows wealth to be fully utilized
Helps in the expansion of money
supply.
CHARACTERISTICS OF
CREDIT
1. Bi-partite contract
2. Pecuniary contract
3. Fiduciary contract
4. Risks
5. Futurity
C’S OF CREDIT
1. Character
2. Capacity
3. Capital
4. Collateral
5. Condition
OTHER C’S OF CREDIT
6. Currency
7. Country
CLASSIFICATION/KINDS
OF CREDIT
A. Personal Credit – are those credit
obtained for one’s use.
3 Types of Personal Credit
A.1 – Service Credit –
(Lawyers/CPA’s/Doctors etc.) these
professionals usually bill their clients for
services rendered.
CLASSIFICATION/KINDS
OF CREDIT
A.2 – Retail Credit – goods obtained
mostly on retail.
3 Categories of Retail Credit
a.2.1 – Regular Charge Account – you are
charged the goods you obtained on credit.
Usually paid within 15 to 20 days after
you are billed.
CLASSIFICATION/KINDS
OF CREDIT
a.2.2 – Revolving Charge – the credit is
not paid in full within this period but it is
Divided into amount which are to be paid
in longer period.
a.2.3 – Installment Plan – almost the same
as revolving charge where in debt is paid
off over a certain period of time.
CLASSIFICATION/KINDS
OF CREDIT
the difference is that, the creditor
usually requires most of the time, a
down payment. (i.e. 12 mos.to 26 mos.)
Only durable goods are sold in
installment, usually has a carrying
charge or shipping costs, usually
evidenced with written contract. (i.e.
cars/appliances/real estate/furnitures)
CLASSIFICATION/KINDS
OF CREDIT
A.3 – Personal Loan Credit – differ from
retail or consumer credit. The cash or
money is given as credit instead of
goods/services. (i.e.
banks/pawnshop/credit union/sss/pag
ibig/GSIS
CRITERIA FOR GRANTING
PERSONAL CREDIT