Consumer Credit

Group members:
Shellney @ Veronica Sadom
2006132171
Nurul Azzahra Bt Othaman
2006129863
Shahirah Bt Mohamad
2006129879
Erni Wahyuni Trimo
2006135365
 • Introduction
• Uses and misuses of credit
• Advantages of credit
• Disadvantages of credit
• Protecting yourself against debit/credit card
fraud
• Type of Credit
1) Close End Credit
2) Open End Credit
• Sources of credit
 What is consumer credit?
• as an arrangement to receive cash, goods
or services now and pay them in the
future

• a debt that someone incurs for the

purpose of purchasing a good or service.
 Uses and Misuses of Credit
• Credit is use to buy goods and services
• Examples of uses of credit :
- A medical emergency may leave a person strapped
for funds
- An engineer may need a car to go to his workplace
- Students might need a loan to support their
education. E.g. PTPTN loans
- Husbands who need to buy a house for his family will
need a housing loan etc

• Example of misusing credit : Shopaholics.

 Advantages of credit
• Enables people to enjoy goods and services now
• Credit card allows purchase of goods when cash is low
• Having credit available during times of financial
emergencies can be very important
• It is safer to use credit
• Credit allows consumers to take advantage of seasonal
sales or to avoid anticipated price increases
• Some interest and finance charges can be claimed as
deductions on federal income taxes
• Credit indicates stability
 Disadvantages of Credit
• Overspending
• The temptation to overspend especially during the
periods of inflation
• Failure to repay a loan may result in loss of income,
valuable property and your reputation.
• Misuse of credit can also leads to a long-term financial
problem, damage to family relationships, and a
slowing of progress towards financial goals
• Borrowers are liable for their debts regardless of
changes that occur in the future
• Credit costs money
 Protecting Yourself Against
Debit/Credit Card Fraud
• Sign your new cards as soon as it arrives
• Store in a secure place
• Do not give your card number over the phone
• Get your card and receipt after transactions, and
double-check to make sure it is yours
• If your billing is incorrect or your card has been
stolen or loss, inform the card issuer
immediately
 Type of Credit

• There are 2 types of consumer credit

available:

- close end credit

- open end credit

 Close End Credit

• used for specified purpose and involves a

specified amount
• only have to pay back one time loans in a
specified period of time and in payments of
equal amounts
• Examples of close end credit are mortgage
loans, automobile loan, and installment
loans
 3 Types of Close End Credit
• Installment sales credit - loan that allow you to receive
goods, that usually high priced item such as large
appliances or furniture

• Installment cash credit - direct loan of money for personal

purposes, home improvements, or vacation expenses

• Single lump sum credit - loan that be repaid in total on a

specified day
 Open End Credit
• the loans are made on a continuous basis and billed periodically for
at least partial payment
• Example of open end credit are card issued by department stores,
bank cards (Visa, MasterCard), Travel and entertainment cards,
(Diners Club, American Express), and Overdraft Protection
• make any purchases you wish if you do not exceed your line credit
• may have to pay interest, the periodic charge for the use of credit,
or other finance charges
• Incidental credit is a credit arrangement that has no extra costs and
no specific repayment plan.
• Most of the bank extend revolving check credit or also called as
bank line of credit. Bank line of credit is a prearranged loan for a
specified amount that you can use by writing a special check
• Credit card - popular sources of consumer credit
• Smart card - include credit cards, a driver’s
license, a health care ID with yr medical history
and insurance information, frequent flier miles,
and telephones cards.
• Debit card - bank cards, ATM cards, cash cards,
and check cards . electronically subtracts from your
account at the moment you buy goods or services
• Travel and entertainment (T&E) cards - not a credit
card . The monthly balance is due in full.
• Home equity loan - A loan secured by equity value in
the borrower's home
Sources of Credit….
1 ) commercial banks
2 ) Finance Co.
3 ) Credit Union
4 ) Savings & Loans
Associations
5 ) Sales finance co.
6 ) Life insurance co.
7 ) Brokerage firm
8 ) Pawnbroker
9 ) Loan shark
10) Family and friends
 1) Commercial Banks
 Commercial banks make loans to borrowers who need
them and who have the capacity to repay them.
 Loans are the sale of the use of money by those who
have it (banks) to those who want it (borrowers) and are
willing to pay a price (interest) for it. Banks make several
types of loans including consumer loans, housing loans
and credit card loans.
 Consumer loans are for installment purchases, repaid
with interest on a monthly basis. The bulk of consumer
loans are for cars, boats, furniture, and other expensive durable
goods.
 Housing loans may be for either residential mortgages, home
construction, or home improvements.
 Credit card loans may be available in the form of cash
advances within prearranged credit limits.
 Examples of Comm.Bank :
• Affin Bank Berhad
• Alliance Bank Berhad
• AmBank Berhad
• CIMB Bank Berhad
• EON Bank Berhad
• Hong Leong Bank Berhad
• Malayan Banking Berhad (Maybank)
• Public Bank Berhad
• RHB Bank Berhad
 2) Finance Company
 specializes in personal installment loans and second
mortgages.
 Consumers without an established credit history can
often borrow without collateral.
 often willing to lend money to consumers who are
having difficulty in obtaining credit somewhere else, but
because the risk is higher, so is the interest rate.
 The interest rate varies according to the size of the loan
balance and the repayment schedule.
 process of loan applications are quickly, usually on the
same day that the application is made, and design
repayment schedules to fit the borrower's income.
• Example of Finance Company:
There is none as all previous ones
have been acquired by their
anchor (commercial) banks.
 3) Credit Union
 Credit Unions are nonprofit cooperatives organized to serve
people who have some type of common bond.
 The nonprofit status and lower costs of credit unions usually
allow them to provide better terms on loans and savings then
commercial institutions.
 The costs of the credit union may be lower because
sponsoring firms provide staff and office space, and because
some firms agree to deduct loan payments and savings
installments from member's paychecks and apply them to
credit union accounts.
 Credit unions often offer good value in personal loans and
savings accounts.
 usually require less stringent qualifications and provide faster
service on loans than do banks or Savings & Loan Assoc.
Credit unions exist in a wide range of sizes, ranging
from volunteer operations with a handful of
members to institutions with several billion
dollars in assets and hundreds of thousands of
members.
List of licensed credit union :
COMPANY SERVICES
a) Wing Bee Credit & Credit Unions
Leasing Sdn. Bhd.  Financial Services
No. 199 & 199A, Jalan San  Loans
Peng, Kuala Lumpur Wilayah
Persekutuan 552000 Malaysia
Tel : 03-9222-4669
Fax : 03-9222-4676
Credit unions….
b) JUNE CREDIT & MORTAGE SDN Credit Unions
BHD
14 JLN MORSHIDI SIDEK 96000 SIBU
Sibu Sarawak 96000 Malaysia

Tel : 08432-0512
c) GAN KENG KET & SONS CREDIT Credit Unions
SDN BHD
15114 JLN ZAABA 70100 SEREMBAN
Seremban Negeri Sembilan 70100
Malaysia
Tel : 06763-1122
d) CHEE HONG CREDIT & LEASING Credit Unions
SDN BHD
21 JLN DATO KOYAH 10050
GEORGETOWN
Georgetown Penang 10050 Malaysia
Tel : 04262-6963
e) Malaysia Export Credit Cargo Insurance
Insurance Credit Insurance
Berhad Credit Unions
Level 17, Bangunan Bank Export Representatives
Industri,
Financial Services
Bandar Wawasan, 1016, Jalan
Insurance
Sultan
Logistics Services
Ismail, Kuala Lumpur Wilayah
Persekutuan 50734 malaysia
Tel : 03-2691-0677
Fax : 03-2691-0353
f) TAYEN KREDIT SDN BHD Credit Unions
320 JLN TUANKU ANTAH 70100
SEREMBAN Seremban Negeri
Sembilan
70100 Malaysia

Tel : 06762-1923
g) ) KIMLING CREDIT Credit Unions
CORPORATION (M) SDN BHD
26 JLN KAMPUNG KULI 75200
MELAKA 75200 Malaysia
Tel : 06284-9119
 4) Savings & Loans Assoc.
 used to specialize in long-term mortgage loans
on houses and other real estate.
 offer personal installment loans, home improvement
loans, second mortgages, education loans, and loans
secured by savings accounts.
 S&Ls lend to creditworthy people, and usually, collateral
may be required.
 The loan rates on S&Ls vary depending on the amount
borrowed, the payment period, and the collateral. The
interest charges of S&Ls are generally lower than those
of some other types of lenders because S&Ls lend
depositors' money, which is a relatively inexpensive
source of funds.
Types of S&Ls….
• AEON Credit Service (M) Sdn Bhd
• American International Assurance Company Limited
• Bank Kerjasama Rakyat Malaysia Berhad
• Bank Pembangunan Malaysia Berhad
• Bank Perusahaan Kecil dan Sederhana Malaysia Berhad (SME
Bank)
• Bank Simpanan Nasional
• Borneo Development Corporation ( Sabah ) Berhad
• Borneo Development Corporation ( Sarawak ) Berhad
• Credit Guarantee Corporation Malaysia Berhad
• Export-Import Bank Malaysia Berhad
• ING Insurance Berhad
• Malaysia Industrial Development Finance Berhad
• MBF Cards ( Malaysia ) Sdn Bhd
• Prokhas Sdn Bhd
• Sabah Development Bank Berhad
5) Sales finance companies
 Sales finance companies
• Act likes any other commercial bank or credit
union
• Provide credit for customer of an affiliated
company, eg. Ford motor credit co., Eon and
Proton co.
• Offer less expensive interest rates → under 4%
• Customer not deal directly with sfc, but will pay
monthly payment to sfc.
6) Life Insurances Companies
 Life insurance companies
• For policyholders who own policies that
include saving component or cash value
• Low interest rate – take no risk, pay no
collection cost
• Allow to borrow up to 80% of
accumulated cash value
• No date or penalty on repayment
• Eg, ING Co., Great Eastern Life
7) Brokerage firms
 Brokerage firms
• For investor who have securities in a margin
account
• Maximum amount of borrowing – depend on
market value of securities
• Additional collateral may be required
• Can be used for any purpose – not only for
investment needs
• Eg, Asia Pacific brokerage, UBS Securities
Malaysia
8) Pawnbrokers
 Pawnbrokers

• For personal property that left in the

possession of lender
• Unconventional – but secured loans
sources
• Eg, Keris emas services Malaysia & RHB
Islamic Bank
• Pay loan and interest at time – get back
the property
• High interest rates - in Malaysia 5%
• Some other country, the maximum rate is:
- 36% on $.01 to $990 of the loan
amount;
- 21% any portion of the loan amount
from $990.01 to $3,300;
- 15% on any portion of the loan amount
over $3,300
9) Loan sharks
 Loan sharks

• Unlicensed lenders – operate illegally

• Charge excessive rates – exceed 100%
• Borrower not protected by any form of
contract or term and conditions
• Collection method – involve violence or
other criminal conduct
10) Family and friends
 Family and friends

• Best sources of credit

• Treat all transaction such
businesslike manner – to avoid
misunderstanding
• Interest rate – can be discuss
Conclusion
 Conclusion

 Consumer credit

 Debt that someone incurs for the purpose

of purchasing a good or service.
 Conclusion cont…

• Uses and misuses of credit

• Advantages of credit
 Enables people to enjoy goods and services
 Purchase of goods when cash is low
 Safer to use
 Take advantage of seasonal sales
 Indicates stability
 Conclusion cont…

• Disadvantages of credit
 Overspending
 Long-term financial problem
 Liable for their debts regardless of changes that
occur in the future
 Costs money
 Conclusion cont…
• Type of credit
 Closed end credit
 installment sales credit
 Installment cash credit
 Single lump sum credit
 Open end credit
 Credit card
 Debit card
 Smart card
 Travel and entertainment card
 Home equity loan
 Conclusion cont…
• Sources of Credit….
Commercial bank
Finance Co.
Credit Union
Savings & Loans Associations
Sales finance co.
Life insurance co.
Brokerage firm
Pawnbroker
Loan shark
Family and friends
Thank You…