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BANK FINANCING (HOUSING LOAN 🍀 (Definition …
BANK FINANCING
HOUSING LOAN 🍀
Definition The housing loan is a loan taken by a borrower from the bank issued against the property intended to be bought on the part by the borrower giving the banker a conditional ownership over the property
Types of land ownership
Freehold - the ownership is absolute and last indefinitely
Leasehold - expires at some date and it will revert back to the owner
- duration of lease cannot exceed 99 years
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JAN 2018 Explain any 2 characteristics of housing loan (5m)
MAR 2016 Briefly explain the 6 characteristics of housing loan (6m)
SEP 2015 Discuss any 4 common features of a housing loan (10m)
HIRE PURCHASE
ADVANTAGES
- Maximum financing of 90%
- Hirer can opt for early settlement
- Hirer becomes the owner of the goods once the loan settled
- Fast processing and approval.
DISADVANTAGES
1.Ownership
2.duration
- Interest rate
-Hire Purchase is an installment credit which the hirer agreed to take the goods on hire at a stated rental with an option to purchase
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MARCH 2016 characteristic of Hire Purchase (6m)
OCT 2016 4 characteristic of hire purchase (10m)
MARCH 2017 characteristic of hire purchase (5m)
PERSONAL LOAN
Definition
-A loan that establishes consumer credit that is granted for personal use usually unsecured and based on the borrower's integrity and ability to pay
-The borrower's willingness to repay the loan
-Must be paid off at specific time
characteristics
-It's specify the loan amount, interest rate and the duration of the loan
-Bank charges will be included in repayment amount
-Minimal of eligibility and documentations requirement
-The agreement would specify the prohibited purposes of the loan
Advantages
:<3:Easily available
:<3:No middlemen
:<3:Unsecured loan
:<3:less processing times
:<3:All purposed loan
:<3:Minimums document required
Disadvantages
:red_cross: Strict qualification requirement
:red_cross: Require credit history
:red_cross: Risk to the lender
:red_cross: Sometimes bank require for account opening
END FINANCING :<3:
Definition Financial institutions that provide bridging loans to developers can also arrange to finance prospective buyers home purchases.
How Do The Loans Contact The Whole Home Building Process?
1)Developers approach financial institution for a bridging loan.
2)Developer can now proceed to do necessary marketing arrangements.
3)If buyers are interested in a purchase an S&P Agreement & the developer receive 10% down payment.
4)Home buyers who borrow mortgage loan from end-financiers.
Advantages
-Low monthly repayment
-Decide to take out a secured loan rather than remortgage
-Changing secured loan
-Loan can use any purpose
Disadvantages
-High interest rate
-Paying off your secured loan each month may leave you short of cash to meet other bill
-Compare secured loan online to scour the market for the best offer currently available
COMMERCIAL & INDUSTRIAL HIRE PURCHASE -financing for new and upgrading plsnt, equipment and machinery as part of expanding business capacity without incurring high upfront cash payment
ADVANTAGES
- to return the goods to the owner
- to claim damages for any loss suffered
- people with a regular and stable income, and capacity to pay installments from the current income.
DISADVANTAGES
- total sum of capital payments will be higher than the full payment on the asset purchase
- administrative complexity and costs will be greater
- may not be useful if the client as lower cost of finance and credit
CHARACTERISTIC OF INDUSTRIAL HIRE PURCHASE
- possession
- ownership upon the full payment
- installment buying
- social innovation
- expands economy
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LEASE :fire:
Definition
-lessor (the owner of the goods)
-lessee (the user of the goods)
-lease is a contract whereby a lessor lease the goods to lessee
Characteristic Leasing
-Lease term
-Lease payment
-Delivery/ Use of leased of equipment and
lease payment
-Points to be acknowledge during the lease term
-Options at the end of lease contract
Types of Leasing
- Financial lease
- Operating lease
- sale and lease back
- Direct lease
5.Leverages lease
Advantages
-Saving of capital
-Flexibility and convenient
-Planning cash flows
-Improvement in liquidity
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PAST SEMESTER QUESTION
OCTOBER 2016
: Define the concept of leasing (5m)
: With a diagram, describe in detail the leverage leasing (10m)
MARCH 2016
: Briefly explain the Operating Lease Agreement (10m)
SEPTEMBER 2015
: Explain briefly two types of Lease Agreement (8m)
FACTORING
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ADVANTAGES
-Factoring provide a large and quick boost to cash flow
-it can be a cost effective way of outsourcing sales ledger
-Factor can prove an excellent strategic
DISADVANTAGES
-increase cost of finance and thus cost of running the business
-may not be much use where companies have one time sales with the customers
-may not be useful if the client has lower cost of finance and credit
-It is a transaction where the business sell its acc receivable to a third party known as factor. -there are 3 parties involved which is debtor, seller and factor.
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