CONSUMER FINANCE

MEANING OF CONSUMER FINANCE

It refers to the raising of finance by individuals for eeting their !ersonal e"!enditure or for the ac#uisition of durable consu er goods and for the !urchase $creation of an assets%

IM&OR'AN' AS&EC'S
&arties to the transactions Modes of consu er finance &rocedure for granting 'er s of financing &ur!ose of raising finance (enefits of consu er finance

&AR'IES 'O ')E 'RANSAC'ION

In A (i!artite Arrange ent A*borro+er$Consu er (*dealer Cu Financer In A 'ri!artite Arrange ent A* Custo er$(orro+er (* ,ealer$Sellers C*financer- ay (e A (an. Or Non (an.ing Co !any*

MO,ES OF CONSUMER FINANCE

)IRE &URC)ASE INS'A/MEN' S0S'EM O1ER,RAF' CRE,I' /OANS

)IRE &URC)ASE
)ire !urchase eans a transaction +here goods are !urchased and sold on the ter s that 2*!ay ent +ill be in install ent 3*!ossession of goods is given i ediately 4*o+nershi! re ains +ith sellers till the last install ent !aid by buyer 5*the seller can re!ossess the good in case of any default 6*each install ent +ill be treaed as hire charges till the last install ent

RIGHTS OF HIRER
'he hiree -vendor* can not ter inate the hire !urchase agree ent 'he right to re!ossess the goods 'he hirer has a right of receiving a state ent E"cess !ay ent hi ade by the hirer +ill be returned by the o+ner to

installment system under hire purchase

It ay be of t+o ty!es 2* Conditional sale 3* &ledge or hy!othecation

Overdraft$de and loans

Under an overdraft interest is charged on the a ount actually utili7ed by individual custo er% overdraft facility is !rovided against the security of life insurance !olicies8 fi"ed de!osits8 govt% securities etc% 1) Loan against equitable mortgage of immovable property9 % 2) Loan against NSC/IVP/KVP

4* L!"NS

"#"INS$ LI%& INS'("NC& P!LICI&S In this loan is advanced either in for of de and loans or overdraft as :;< to =6< of the surrender value to be ascertained fro insurance co !any% the !olicy has to be assigned to the ban. at the ti e of ta.ing credit against !olicy%the interest rates +ill vary bet+een 22< to 23< !%a%

))Loan against (*I relief bon+s (an.s and non ban.ing finance co !anies also !rovide loans against the security of R(I relief bonds to the individual in order to eet their !ersonal$business needs and contingencies% the loan is !rovided in for of ter loans or overdraft% 'he ter loan agree ent ay !rovide for the sub ission of9 2* delivery letter 3* transfer deed 4* endorsed bonds 5* de!ository !artici!ant note

 Loan against s,ares an+ +ebentures finance is !rovided to the individual of high credit standing against security of fully !aid shares and debentures held by the 8 in their o+n na e8 .e!t in !hysical or de ateriali7ed for %

&rocedure for granting finance

A% &re sanction stage 2% collecting credit infor ation 3% receiving of a!!lication for 4% analy7ing custo er>s credit +orthiness 5% acce!ting$re?ecting a!!lications 6% entering into a contract (% &ost sanction stage a* sub ission of docu ents b* !ay ent of credit$finance c* !ay ent of install ents

'er s of financing
'hese include the follo+ing9 2% A ount of loan$credit 3% Margin re#uire ents 4% Security 5% &eriod of finance 6% Rate of interest @% Fees and charges A% Mode of !ay ent :% docu entation

Purpose of Raising Finance

Housing Finance
It refers to providing finance to the individual or group of individuals for the purchase, construction or related activities of house flat etc! The housing loan is a type of instalment credit "hich forms the largest single source of housing finance!

 The housing loan can be availed for following purposes: #onstruction E$tension Purchase #om%ined loan for purchase of plot and construction &c'uired house through cooperative housing society

Rate of Interest
Fi$ed rate of interest loan Floating or varia%le rate of interest loan Charges & Fees payable Processing fees Search report charges %y the advocate at the time of sanction Insurance charges Fine for non(payment of late payment of instalments

Security for the loan

Primary security #ollateral security Interim security

Institutions providing housing finance

I)*I H)F# I#I#I S*I +I# Housing Finance Tata Home Finance

Parameters of the %est house loan

+o"er interest rate Income ta$ incentive +ongest tenure +o"est margin #omplete doorstep service no pre(payment charges )iscount on processing fee #oncession in credit card &T, card fees

Educational +oans
The prime aim is to ma-e careers happen! The no! of students see-ing admission to professional courses is multiplying every year! If one has the am%ition and drive, the %an-s "ill ta-e care of finances involved!

Eligi%ility #riteria
Should %e an Indian national *elongs to the age group of ./(01 years Has secured admission in a professional technical course, foreign university institution Should have secured minimum /12 mar-s in the previous 'ualifying e$amination

O%3ectives of finance
To finance all fees To meet e$penses To provide financial assistance To cover course fee, hostel and mess charges

Processing fees
S*I, #*I, *O* 4 do not charge any fees HS*# and *an- of Pun3a% 4 .2 of the loan

Repayment Period
5 (6 years repayment after commencement of

&utomo%ile Finance
7nder the %an-s auto loan scheme there is a vehicle loan for every class i!e! 8 "heeler9s loan, 8nd hand car loans, ne" car loan! The mar-et for auto loans is large and lot of opportunity e$ists there for the %an-s and other finance companies "ho %y adopting customer friendly policies and mass advertising can surely ma-e auto loan scheme a success!

Eligi%ility
Permanent employees of govt!, pu%lic private sector "ith minimum of :years service! Professionals and self employed such as doctors, #&Ss, ,*&s etc! Persons engaged in agricultural and allied activities!

Purpose
&uto loans are e$tended for the purchase of vehicle %oth for personal and professional use! Type of loan Finance is provided in form of term loans e$tending for a period from . to 5 years! Rate of interest ;aries from %an- to %an-

Insurance
& insurance policy is ta-en for mar-et value or .12 a%ove the loan amount "hichever is higher! Processing Charges ,ost of the %an-s do not charge any processing fee, or Rs! 851 to Rs! 511 may %e collected as one time fee from the customers!

Personal +oans
General purpose loans are advanced to the individual to meet personal e$penses! Thus, "ith such easy finance facility, a consumer can %uy "hatever he has in mind!

Eligi%ility #riteria
Salaried employees Self employed professionals such as )octors, #&s, ,*&s, etc! oan amount ,inimum 4 Rs!85111 ,a$imum 4 Rs! .1,11,111

Other features
<o security or guarantor re'uired Repayment period .8 to 0= months Speedy approval

Finance to meet Festival E$penses

The lo"er or middle income group of individuals "ho cannot satisfy the re'uirements of the personal loan scheme see- financial assistance from the %an-s for short duration to meet e$penditure relating to a festival! The %an- may charge nominal fee of Rs!.11 per application!

Eligi%ility #riteria
Employees of govt! Profit ma-ing Pu%lic institutions! Etc! "ith a minimum of 8 years service! Self employed persons Persons having regular source of income from verifia%le sources li-e pension and interest from govt! securities etc!

Holiday Finance
Today, consumer "ho finds himself una%le to meet the cost of pac-age gets ready to accept the option! For e$, SOT#9s European tour pac-age is priced at over Rs!6/,111!

Finance for ,edical Treatment

It is very difficult for individuals especially the salaried class to arrange funds at short notice to ma-e payments to hospitals! *an-s e$tend loans to meet such e$igencies! +oans are availa%le to all such patients "ho are suffering from diseases "here mortality pro%a%ility is lo" and the patient emerges as a healthier person after treatment!

*enefits of #onsumer Finance

Rising standard of living Forced savings Help consumes meet emergencies Increase in demand for physical goods

Than-(>ou