Consumer Finance | Benefits to banks
Consumer finance enables banks to create money out of thin air. When a bank gives loan to a consumer, it sets off a chain of steps in the form of a procedure. They are
- The customer is asked to produce a proforma invoice from the proposed seller of the goods.
- The consumer is asked to pay into the bank 15% of the value of the goods, he is proposing to buy.
- A pay order or draft is made by the bank in favor of the seller.
- The pay order or draft is made by the bank in favor of the seller.
- The goods are delivered and they are also insured.
- The customer starts paying the installments from the subsequent month of his purchase.
- Before granting loan, a promissory note is obtained from the customer along with a guarantee.
- In case of default, the guarantor will be held liable.
- The interest will be on a declining balance by which the loan is made much cheaper, as the effective rate of interest will be less.
- In the case of purchase of vehicles, the registration certificate book will contain hypothecation note because of which the sale of vehicles to the third party is prohibited,
- On the payment of entire loan, the loan agreement is terminated, which was executed at the time of commencement of the loan.
- The promissory note is cancelled and returned to the customer.
- In the case of hypothecation of vehicles, a declaration will be given by the bank to the transport authorities for cancellation of hypothecation. The same will be done to insurance companies also.