CREDIT CARDS & HOME LOANS FOR 2024 EXAMS | FREE JAIIB NOTES

CREDIT CARDS & HOME LOANS FOR 2024 EXAMS | FREE JAIIB NOTES

This article talks about the services of credit cards, home loans, and personal loans which are provided by the banking channels. It is important for the JAIIB candidates to go through the basics of the services we regularly deal in as in daily life, there are some things that they ought to miss out on while doing their day jobs.

You can even find a PDF file of this same article at the end of this article so that you can prepare for your JAIIB 2024 Exams.

CREDIT CARDS

One of the services which are provided by banks is the use of credit cards. It is basically a plastic card that is issued to users so that they can use it for making payments.

It has also allowed cardholders to purchase goods and services based on the promise to pay for these goods and services later on.

The bank creates a kind of revolving account in which a line of credit is granted to the consumer from which the cardholder pays money to the merchants. It is also a type of cash advance given to the user by the bank.

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BENEFITS TO CREDIT CARD HOLDERS

The benefits of having a credit card are listed below:

Emergency fund: There is a large number of Merchant outlets that let V card holders make purchases of goods and services up to the ceiling credit limit that has been set by the bank without using cash or cheque. This is especially useful at the time of emergency.

Interest-free credit: Cardholders enjoy a period of interest-free credit which will depend on the bank and scheme of the card.

Different banks offer different cards which can change from normal to Gold cards. The interest-free credit period ranges from 15-51 days.

Cash withdrawal: Cardholders can also withdraw cash from the ATMs of their Bank branches.

DISADVANTAGES TO CREDIT CARD HOLDERS

Even though there are so many benefits of using credit cards, there are still disadvantages of using credit cards:

• When we use credit cards to make payments, we often end up overspending.
• Credit cards also bear the risk of fraud because of its chances of getting lost.
• These cards already have the signatures of a cardholder, signatures can be forged which can result in a loss. What kind of loss can be avoided by using photo credit cards?

PARTIES INVOLVED IN CREDIT CARD

Cardholder: It refers to the consumer who holds a plastic card & uses it to make purchases.

Card-issuing bank: It refers to the bank or financial institution which issues the card to the cardholder. Bank bills the customer for repayment. In this case, banks or Financial Institutions bear the risk that the card might be used for fraudulent purposes.

Today, there are a number of players in the credit card market who are ready to issue you credit cards. When these cards are issued by banks to cardholders who reside in different countries, they are known as off-shore credit cards.

Merchant: The businesses or individuals who accept payments through credit cards for their products or services are known as Merchants.

Acquiring bank: It happens to the bank we accept the payment on behalf of the merchant for the products or services.

Independent sales organization: These are the resellers of the services which are provided by the acquiring bank to the merchants.

Merchant account: This can either be the acquiring Bank or the Independent sales organization. In most of cases, it refers to the organization with which the merchant deals.

Credit Card association: It refers to the association of banks that issue credit cards. For example: Visa, MasterCard, RuPay, American Express and Discover, etc. These associations at terms for the transaction for merchants, banks who issue these cards as well as the acquiring banks.

Transaction network: It is a system which does the implementation of the mechanics of all electronic transactions. This system might be operated by an independent company or one company can operate multiple networks.

Affinity partner: Sometimes, to attract customers some Institutions lend their names to an issuer bank because they have a strong relationship with that institution and in return, they get the free or a percentage of the balance for each card that gets issued under their name.

Some of the examples: Universities, charities, major retailers, sports teams and professional organizations.

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HOME LOANS

Banks are offering home loans to Indian residents and non-resident Indians for the purpose of purchasing or constructing a loan or flat or for doing repairs or renovation of their houses.

THE PROCEDURE AND PRACTICES FOR HOME LOANS

Target Group: Generally, the target group consists of salaried class, self-employed individuals, professionals and businessmen. Age criteria can be fixed by the banks to avail home loans.

Purpose: The loan is approved so that it can be used for the purpose of purchasing or constructing a house or flat, ought to do some renovation work for repairs of the house. It can also be given to purchase house sites (land).

Quantum of loan: The amount of loan will depend on the gross monthly income or net monthly income of the borrower. For this purpose salary certificates might be demanded by the bank from the salaried class and in case of other people, banks can demand for their income tax returns.

Statement of bank account can also be asked by the banks for a specific period of time.

Age: For the salaried class, the banks may fix a lower and upper age for the people who can avail home loans after considering their remaining period of service and in other cases, the income that can be on during the period of loan is considered.

Repayment: Mostly, banks offer a long period for Repayment of loans ranging from 20 to 25 years. It will be paid as per the EMIs (equated monthly installments).

If the loan has been approved so that it can be used to purchase an already built house, banks need to make sure that the life of the building will be longer than the payment period that has been allowed + the cushion period (say 10 years).

Holiday period is also allowed by the banks for the repayment of loan. And it will be more in case the loan is being used for constructing a house than for the purchase of a ready built house.

Security: In most of cases, property that will be purchased or constructed from the loan proceeds, is taken as a security by way of mortgage. There are also times when income of the spouse is also taken into consideration to decide the quantum of the loan and in those cases, his/her guarantee is taken as a personal security.

Margin: Banks may require that a certain percentage of the cost of the project be borne by the borrower from his or her own sources. And when loan is granted either to repair or renovate the house, this margin may be higher.

Rate of Interest: It is cheaper to get home loans if compared to other loans. Many banks offer interest to date which is below the BPLR (benchmark Prime lending rate). The borrower also gets the option to select from either a floating rate or a fixed rate.

DOCUMENTS REQUIRED

When someone applies for the loan, some of the documents which are necessarily required are:

• Sale deed or agreement of sale
• NIL EC (No encumbrance certificate) for 13 years
• Building plan that has been approved
• Valuation report made by an engineer who has been approved by the bank
• Last 12 months’ bank statement
• Paint document for 30 years
• NOC from the housing Board, as per the applicability

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