Personal Credit

THE REALM OF PERSONAL CREDIT ENCOMPASSES ANY

AND ALL FORMS OF CREDIT WHICH TEND TO ENHANCE THE
LIVING STANDARDS OF INDIVIDUALS AND FAMILIES
THROUGH THE ACQUISITION OF CONSUMPTION GOODS AS
WELL AS ADDED CONVENIENCES FOR COMFORTABLE
LIVING.
 Purpose: Is to satisfy human wants. Sometimes
individuals and families run out of cash momentarily and
in such cases will turn to the availing of personal credit in
different forms, either in goods, services or money loans.

Characteristics: Personal credit is based largely on the

character of the individual and also his capacity to pay.
The latter is adjudged from the sources of the individuals
income and the frequency of scheduled payments.
 Types of Personal Credit

Charge Account
Installment Buying
Cash Loans
 Charge Account

Isthe simplest and perhaps the oldest type of

personal credit. Not only do the middle and low
income group avail of it but even the more
affluent members of our society. While in the past
the use of credit was looked upon with shame
and disfavor, there has been a big shift in this
thinking.
Characteristics: Generally, charge accounts come in the form of
good and services rather than the cash loans.

Credit Card system: The member or cardholder affiliates with a mother

organization which credit-checks him.

Sources of Charge Accounts: The sources of charge accounts are naturally quite
numerous, for they include all commercial establishments catering to the
consumers needs.

Collection of Charge Accounts: Charge accounts are collected according to

the term agreed upon. The borrower usually goes to the store where purchases
the items and make payments.
 Installment Plan

Sometimes called installment buying, installment

selling, deferred plan and etc. The main feature is the
fact that the payments are made in staggered
amounts at specified period.
 Characteristics: The system of buying on installment is
generally alluded to as the buy now, pay later
plan.
Installments contracts: Installment buying is usually covered by installment
contracts. These often come in the form of collateral promissory note in view of
the fact that the most installment buying transaction is secured.

Conditional Sales Agreement: This is a contract entered into between the buyer
and the seller whereby it is agreed that the buyer may take possession of the
property and use the same.

Chattel Mortgage: The nature of the chattel mortgage is almost the same as the
conditional sale agreement where the principle of repossession is concerned.
However, a chattel mortgage is executed conveying to the creditor the title to
the property.
Acceleration Clause: is sometimes one of the provisions in an installment
contract, whether covering goods, services, or money. In effect, it results in an
acceleration or hastening of the term payment.

Add-on or Open-End Contract: this contracts leaves open the borrower to

purchases a number of articles. However, he can only have title to all his
purchases upon full settlement of the last item purchased.

Balloon Contract: The buyer maybe scheduled to pay equal installment for a
certain period.

Wage Assignment: Also accompanied by a proviso that the paymaster of the

firm where the buyer is working is authorized to collect from the buyers wages or
salaries.
Hidden Clause: The effect of this clause will mean that the buyer is
getting himself something which he does not actually need.

Sources of Installment Plan: Divided into two categories- those

dealing in goods and services and those dealing in money loans.

Collection Of Installment: collection of sales made on installment

plan is made by the store collectors or by collection agencies.
Cash Loans
The third personal credit is in the form of cash
or money loans. If in small amounts, they are
given in lump sum releases. If in substantial
amounts, they are released in installments.
 Sources of Personal Credit
Relative and friends- when one needs cash for any of the purpose to which
cash loans are employed , he may seek the assistance of a relative or a
friend.
Private Money Lenders- some person are engaged in lending activities
without a license. They are generally known as unlicensed money lenders.
Pawnshops- When one is in need of money and he has an item of value, he
may turn to pawnshop for a loan.
Credit Union- is formed by members for mutual benefit.
Saving and loan Association- which are non-stock, non-profit corporations
are also sources of credit.
Personal Finance Companies- Companies engaged in the business of
lending which are neither in the nature of credit unions nor savings and loans
associations are known as personal loan companies.
 Savings and Mortgage Bank- Deal with the general
public.
SmallLoans Department of Commercial Bank-
commercial bank also cater the consumers needs
through small loan departments.
InsuranceCompanies- May also give out loans to meet
personal needs.
Other Sources- Financial Institutions
 Other Sources of Personal Credit

Sources of information- Where does the credit investigator

gather the facts relevant to the antecedents of the business.
-direct sources
-application form, the customer record, what the credit executive
knows about the applicant, personal interview, a visit to The plant or
business, financial statements , correspondence with the applicant and
other sources.
 The application form- The very first source of data and one deemed as the
most fruitful is the application form. It is sort of introduces the applicant to
the creditor.
The Customer Record- Will show the antecedent information.
What are Credit Executive Knows about the Applicant- This information will
be largely one of a sixth sense on the part of credit executive.
The Personal Interview- May be conducted either by the credit executive
himself, by his representatives or by salesman.
A visit to the plant or Business- An ocular inspection of the plant or the
place of business may yield different impressions.
Financial Statements- It is said tell a story. But the story can become vivid
and revealing upon analyzing the figures.
 Bank Files- Constitute the records of customers in regard to their performance
in credit dealings.
Mercantile Agencies- These are purportedly organized for the gathering of
information for credit purposes.
Ledger Interchange- Direct or indirect interchange of the ledger information
can be obtained from credit interchange bureaus or from the creditors own
experience.
Attorneys- Investigators usually seek the assistance of attorneys because of
the latter close association with debtor-clients, specially incases concerning
collections.
Court and Other Public Records- Investigators may also avail himself of court
and other public records.
 Newspapers clippings- Clippings from newspapers regarding the
applicants business and social life may also be helpful.
Other sources- There are numerous other sources which a shrewd
and competent investigators.
Philippines Sources of credit information The direct and indirect
sources of credit data are as applicable to the Philippines as they
are in other countries. But for the mercantile agencies and special
bureaus, the Philippines has its own suppliers of credit information.
Sources in the United States Similarly, in the united states, the
direct and indirect sources discussed constitutes the suppliers of
credit information.
 The Robert Morris Associates, formed in 1919, is also a source
whose aims are closely linked with those of the national
association of credit management. Its by Laws, stress the
following among other things.
A. To promote friendship and understanding among bank
credit men of the national association.
B. To bring about a close relations between mercantile and
financial credit men.
C. To improve methods of gathering, Compiling, analyzing and
disseminating credit data.
 Credit Investigation Report The culmination of credit data gathering is the
credit investigation report.
For a glimpse of the format commercial report its details are incorporated
herein:
A. Heading This will give the companies trade name, owners, principal
officers, and locations.
B. History The origin and development of the business is outlined. This will
reflect the changes in its capitalization, ownership, officers, and related
matters.
C. Method of Operations This will describe the firms merchandise or line of
business.
D. Fire Hazard This will indicate the location and physical condition of the
building, as well as those of the adjoining buildings, and also other pertinent
data relating to fire risk.
 E. Statement Financial statements or data are often made part of the
report. This may be obtained directly from the customer or indirectly from
other sources.
F. Trade Record The ledger experience is the focal point of this part of
the report.
Credit Evaluation Credit analyst will subject to close scrutiny the data
gathered and the reports submitted or available to him. Tests and
measurements will be applied to dee if the credit risk should be accepted
or rejected
The End