In any legal loan, every obligation and restriction is enforced with the help of a contract which also entitles to place the borrower under additional restrictions, known as loan covenants.
In this highly inflated environment, the wealth for people is not equal to each other. The rich are becoming richer and the poor becoming poorer. For helping the poor people for their survival, banks play a very important role by providing different types of loans.
There exist various types of loans which are nowadays being offered by banks to individuals and small entrepreneurs and also to the large owners of the companies. Some of these types of loans are:
• Secured Loans: where the borrower pledges some of his asset like car or property as collateral for getting the loan.
• Unsecured Loans: are monetary loans which are not required to be secured against any of the borrower’s assets.
• Unsecured Credit Lines
• Long – Term Loans
• Short – Term Loans etc.
The best part of these loans is that they provide business people with an opportunity to do something good in the corporate sector.
The most known loan payment method is by fully amortizing payment, where the monthly rate for each month has the same value overtime.
The fixed monthly payment P, for a loan amount of L, for n months and a monthly interest rate c is calculated using a specified formula.
The various abuses occurring in lending are:
• Predatory Lending: in this the loan is granted to the borrower in a position to gain advantage over him or her.
• Loan Shark: this is a case where the money lender is not the authorized lender.
• Usury: here the lender charges excessive interest amount.
• Abuses can also take place in form of customer abusing the lender by not paying back the loan and may have an intention to defraud.
It is a form of plastic money which is widely used for payments facilitating the user to purchase the products and services on credit. It makes our lives simpler as we are not supposed to carry cash everywhere and just a swipe of credit card completes the payment.
The credit period for any purchase starts from the date of billing and not from the date of purchase.
The various benefits of using credit cards are:
• Free Credit Period: it offers a free credit period of 50 – 55 days from the date of billing cycle.
• Online Shopping: it helps us to buy products/ services online or even over phone 24×7.
• Advantage of various Branding Offers: these offers various schemes and discounts which are generally related with entertainment, traveling and shopping etc. which stands useful for the customer. These credit card companies have tie-ups with reputed brands helping them to sell their products and services at attractive prices.
• Borrowing cash through credit cards: these also facilitate to withdraw hard cash through ATMs.
• Reward Points: these also offer reward points on purchases which when accumulated can be redeemed for either cash backs or attractive gifts.
The some of the various types of credit cards are:
• Charge cards
• Credit cards with revolving loan or credit limit
• General purpose credit cards
• Single or limit purpose credit cards
• Premium credit cards
• Affinity credit cards
• Co- branded credit cards
• Secured cards
• Store value or smart cards
Points to take care
• As soon as it is received, the holder needs to sign the panel on back
• Spending should be within the credit limit being assigned by the bank and which if crossed, leads to a hefty fine
• Its advisable to always check the sales vouchers or the charge slips together with the amount when the holder signs
• The PIN number should be regularly changed and should not be given to any individual.
• The CVV number (3 digit number) should also not be provided to anyone
• The personal details, PIN number and CVV number should not be shared with anyone on phone as it might be tracked
• In case of any shopping done online, it should be ensured that the credit card details are entered only on secured websites.
• A proper track of the billing cycle should be kept and the bills should be paid on time for avoiding the interest charges and late fees.
• In case of any unauthorized transaction, the credit card statements should be scanned and kept. And in case if the holder id defrauded, he should immediately contact the issuing bank
• The cash withdrawal from ATM using credit cards is a expensive method as it charges a fee of around Rs.350 together with 3.5 percent interest per day. Therefore, cash should be withdrawn only in case of emergencies.
It is also known as bank card or check card, is a plastic card which provides the user with an alternative to the payment made in cash. Functionally, it can also be called as electronic cheque, as the funds that are withdrawn are directly either from the bank account or from the balance that remains on this card. These debit cards have taken over the cheques and in some instances has also taken over the cash transactions of high volumes. Also, similar to the credit cards, debit cards are also used widely for telephonic and internet purchases but the only difference that exists is that the amount is transferred from the bearer’s bank account instead of making him to pay back at a later point of time.
There exist two types of debit card categories:
1. Virtual debit cards: these are designed to measure to check the fraudulent activities through internet. These exist in forms like gift cards, payroll cards, merchant cards, incentive cards and student cards. The various services offered are payment through internet; SMS transfer; Offline Payments; Money Transfer and Depository Services.
2. Physical debit cards: these are similar to other plastic cards but with difference that cardholders are required to put the money in card before they use it. There exists different types of physical debit cards, a few of them are:
• Re-Loadable Debit Cards: a few of these are payment cards, merchant cards, student cards, payroll cards, government payment cards.
• Disposable Debit Cards: some of these are Incentive Cards, Gift Cards etc.
The various services offered include ATM Services, Money Transfer Services, Online/ Offline Payments, Depository Service and POS terminals.