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

1. The customer is asked to produce a proforma invoice from the proposed seller of the goods.
2. The consumer is asked to pay into the bank 15% of the value of the goods, he is proposing to buy.
3. A pay order or draft is made by the bank in favor of the seller.
4. The pay order or draft is made by the bank in favor of the seller.
5. The goods are delivered and they are also insured.
6. The customer starts paying the installments from the subsequent month of his purchase.
7. Before granting loan, a promissory note is obtained from the customer along with a guarantee.
8. In case of default, the guarantor will be held liable.
9. 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.
10. 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,
11. On the payment of entire loan, the loan agreement is terminated, which was executed at the time of commencement of the loan.
12. The promissory note is cancelled and returned to the customer.
13. 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.