In addition to bank there are other lending institutions also that advance loans and other financial services. These lending institutions are given as under:
1. Savings and Loans Associations
2. Credit Unions
3. Life Insurance Companies
4. Commercial Finance Companies
5. Factor Companies
6. Sales-Finance Companies
7. Consumer Finance Companies
Savings And Loans Associations
These lending institutions receive deposits in small amounts which arc ploughed back in advancing loans to finance the purchases of real estate. The real estate so bought is mortgaged with the creditor.
These lending institutions work on cooperative basis. They comprise those people who are friendly and well-known to one another, e.g. the employees of a company. These employees with the cooperation of the employer lay foundation of a credit union, and save up their money with it on monthly basis. The amount is revered from their monthly salaries. Thus a huge fund is pooled and advanced a a nominal interest rate. Such loans are recovered in monthly installments from the salaries of the debtor employees. Employees use these loans for purchasing durable consumer goods as TV, refrigerators, furniture. etc. The interest earned is distributed to members as profit.
Life Insurance Companies
These companies receive millions of rupees in the form of premiums against life insurance policies. The amount so collected finds its way into various investments including the purchasing of shares, bonds, and debentures. Purchasing bonds, debentures, and other credit instruments is actually advancing loans to the issuing companies. The life insurance company also directly advances loans to businessmen and manufacturers.
Commercial Finance Companies
They deal in money in two ways.
(a). Buying Accounts Receivables
(b). Advancing Direct Loans
(a). Purchasing Accounts Receivable
They purchase accounts receivable at a discount outright in their names. When these receivables fall due they directly collect money from the debtor at a full price. Buying accounts receivable benefits all the three parties. The seller immediately gets cash against selling accounts receivables, the buyer of the merchandise (debtor) gets sufficient time to make the payment and the commercial finance company gets discount as its income.
(b). Advancing Direct Loans
They directly advance loans to various classes of businessmen including producers, wholesaler, retailers, importers and exporters, and others. These loans are used in purchasing machinery, equipment, raw materials and merchandise. Since the loans are secured the influence of the commercial finance company increases on the debtor company. Moreover the rate of interest is twice as bank loans, reasons being greater risk and administrative expenditure.
Factor Companies (Lending Institutions)
The commercial finance company discussed above purchases receivables at a discount on a condition that if they are unpaid the seller of the goods will be responsible and returns the amount received against the sale of receivables. However, the factor company offers a greater facility to business firms.
Sales Finance Companies (Lending Institutions)
Many businesses sell durable consumer goods like refrigerators, TVs, cars, and the like on installments. In such transactions, an agreement between the buyer and seller is drawn. Sales finance companies deal in buying these contracts.
Consumer Finance Company
They make small personal loans. Before advancing they look into the repaying ability, income, financial soundness and job security of the applicant. He is required to deposit a certain amount of money as a security. The company also accepts other types of securities. The interest is charged on monthly basis which is mostly two percent. Lending Institutions
You will need to protect your credit score, regardless if you have active credit cards or not. Loans, cell phones, and rent all affect your credit report; your credit score is determined from the information on your credit report. More >>
Western money is one of the best option to choose for transferring money to any place. More >>
Obtain tips on creating a credit friendly budget that allows you to pay your bills on time and have money left over. More >>
The concept of online banking dates way back to nearly three decades ago. It came into existence in the public eye only in the mid-1990s (this was after it was tested and experimented with for more than ten years). Today, online banking is growing fast in this tech-savvy world. More >>
There are many debates that have taken place based on the indicators that should be used by the traders while trading. More >>
Barter System - Barter System is that system in which goods are exchanged for goods - Barter System More >>
Objectives of Business means the purpose for which the business is established. It is generally believed that the main objective of business is ta make profit and avoid loss. More >>
Functions of Money - Functions of Money as a Medium of Exchange, Measure of Value, Deferred Payment, Store of Value - Functions of Money More >>
The importance of business is that it provides products or services to customers. More >>
The partners of a firm are broadly divided into three main categories. General Partners, Special Partners and Other Partners. More >>