👤 Personal Lending
Personal credit needs, types of personal financial needs, one-time vs revolving credit facilities, and consumer credit overview.
Personal Lending
Apart from commercial credit, banks offer credit for personal needs. This covers a variety of individual financial needs.
Examples of Personal Financial Needs
- Goods and services purchases
- Education and medical expenses
- Housing requirements
- Consumer durables acquisition
- Vehicle procurement
- Travel and leisure activities
Key Characteristics
| Feature | Details |
|---|---|
| Variability | Financial needs differ in value and frequency |
| Types | One-Time Facility: Offered for short-term, medium-term, or long-term. Repaid in installments. Revolving Credit: Can be repeatedly drawn upon and repaid. |
| Popularity | Known as 'Consumer Credit' or 'Retail Asset' business. Growing in demand and boosts bank profitability. |
Personal lending typically includes: housing loans, vehicle loans, education loans, credit card loans. It does NOT include industrial project loans or industrial project financing.
Summary Table: Credit Facilities at a Glance
| Facility | Type | Key Feature |
|---|---|---|
| Cash Credit | Fund-based | Revolving; interest on amount drawn |
| Overdraft | Fund-based | Revolving; linked to current account |
| Bill Finance | Fund-based | Self-liquidating; based on receivables |
| Term Loan | Fund-based | One-time; for capital goods acquisition |
| Demand Loan | Fund-based | Repayable on demand |
| Bank Guarantee | Non-fund based | Contingent liability; three-party contract |
| Letter of Credit | Non-fund based | Trade finance; governed by UCPDC 600 |
| Underwriting | Non-fund based | Obligation if borrower fails to raise funds |
| Derivatives | Non-fund based | Hedging; no immediate fund outflow |
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Personal Lending
Apart from commercial credit, banks offer credit for personal needs. This covers a variety of individual financial needs.
Examples of Personal Financial Needs
- Goods and services purchases
- Education and medical expenses
- Housing requirements
- Consumer durables acquisition
- Vehicle procurement
- Travel and leisure activities
Key Characteristics
| Feature | Details |
|---|---|
| Variability | Financial needs differ in value and frequency |
| Types | One-Time Facility: Offered for short-term, medium-term, or long-term. Repaid in installments. Revolving Credit: Can be repeatedly drawn upon and repaid. |
| Popularity | Known as 'Consumer Credit' or 'Retail Asset' business. Growing in demand and boosts bank profitability. |
Personal lending typically includes: housing loans, vehicle loans, education loans, credit card loans. It does NOT include industrial project loans or industrial project financing.
Summary Table: Credit Facilities at a Glance
| Facility | Type | Key Feature |
|---|---|---|
| Cash Credit | Fund-based | Revolving; interest on amount drawn |
| Overdraft | Fund-based | Revolving; linked to current account |
| Bill Finance | Fund-based | Self-liquidating; based on receivables |
| Term Loan | Fund-based | One-time; for capital goods acquisition |
| Demand Loan | Fund-based | Repayable on demand |
| Bank Guarantee | Non-fund based | Contingent liability; three-party contract |
| Letter of Credit | Non-fund based | Trade finance; governed by UCPDC 600 |
| Underwriting | Non-fund based | Obligation if borrower fails to raise funds |
| Derivatives | Non-fund based | Hedging; no immediate fund outflow |
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