Banking Flashcards
Chapter 4/8 (14 cards)
What is a retail bank?
Banks that provide services to individuals .
What is a commercial bank?
US context
All banks that are doing what thus far has been referred to as activities of a bank.
What is a commercial bank?
In other parts of the world
Banks that specialise in providing services to commercial entities (business) rather than individuals. (Corporate Banks)
What are three most commmon forms of borrowing provided to retail customers?
Loans, mortgages & overdrafts.
What are the standard features for a loan?
- For a set period that is generally less than five years
- At a set rate of interest
- With a defined repayment schedule
What is an unsecured loan?
A loan that does not require any security for example, property to be given up should the loan be outstanding.
What are the features of a mortgage loan?
- Taken out to buy property
- For a set period
- At a variable rate of interest
- With a defined repayment schedule
- Secured on the property the loan is used to buy
- due to substantial amount of money , in line with general interest rat
Why is a mortgage loan secured?
It is secured on the property. If the borrower fails to make scheduled repayments, the bank can take the property in order to repay the loan.
What are the features of overdraft?
- Flexible - able to be drawn, repaid, drawn again up to overdraft limit
- At a variable rate of interest, an arrangement fee may also be payable
- unsecured and repayable on demand.
What are standard features of a credit card?
- Flexible - able to be used up to the credit limit
- At a variable rate of interest
- Repayments of at least a minimum amount are required monthly.
What are the standard features of loans from pawnbrokers and payday loans?
- Easily available: decision is made immediately
- Very expensive in comparison to other forms
- For pawned items, repayment is required to regain possession of the item from the pawnbroker
- For payday loans, loans are very short-term, with repayment required at the next payday.
What is the difference between the quoted interest rate and the effective annual rate of borrowing?
The quoted interest rate does not take into account compound interest in the way the effective annual rate does which shows the actual percentage of the loan.
