Podcast
Questions and Answers
Which of the following is NOT a key characteristic of credit according to the text?
Which of the following is NOT a key characteristic of credit according to the text?
What is the purpose of the Truth in Lending Act (TILA) as described in the text?
What is the purpose of the Truth in Lending Act (TILA) as described in the text?
Which type of credit is described as 'credit that allows you to borrow up to a certain limit and repay it over time (use it repeatedly)'?
Which type of credit is described as 'credit that allows you to borrow up to a certain limit and repay it over time (use it repeatedly)'?
Which type of personal credit is 'usually granted for the purchase of expensive consumer items'?
Which type of personal credit is 'usually granted for the purchase of expensive consumer items'?
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Which type of credit is described as 'credits extended by one businessman to another businessman'?
Which type of credit is described as 'credits extended by one businessman to another businessman'?
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Which type of agricultural credit is used to 'finance the selling and distribution of farm crops'?
Which type of agricultural credit is used to 'finance the selling and distribution of farm crops'?
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Which of the following is NOT a function of credit?
Which of the following is NOT a function of credit?
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Which characteristic of credit implies that it involves a promise to repay?
Which characteristic of credit implies that it involves a promise to repay?
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Which of the following best describes the role of credit in promoting stability in the economy?
Which of the following best describes the role of credit in promoting stability in the economy?
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Which function of credit is directly related to the government sector?
Which function of credit is directly related to the government sector?
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Which characteristic of credit implies that it involves a monetary obligation?
Which characteristic of credit implies that it involves a monetary obligation?
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Which of the following is NOT a characteristic of credit mentioned in the text?
Which of the following is NOT a characteristic of credit mentioned in the text?
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Study Notes
Characteristics of Credit
- Credit involves risk, as there's a possibility of the obligation not being paid
- Credit always involves futurity, with payment done at a future date
Truth in Lending Act (TILA)
- Aims to protect consumers from unfair or deceptive practices by creditors and lenders
- Implemented by Republic Act No. 3765 (1963)
- Regulated by the Monetary Board of the Central Bank of the Philippines
Types of Credit
- Revolving credit: allows borrowing up to a certain limit and repayment over time
- Installment credit: requires fixed repayments over a specified period
- Open credit: requires full repayment at the end of each billing cycle
- Service credit: allows receiving a service now and paying for it later
Personal Credit
- Obtained for personal use
- Three types:
- Service credit (e.g., from doctors, lawyers, dentists)
- Retail credit (e.g., regular charge account, revolving charge, installment plan)
- Personal loan credit (e.g., for expensive consumer items)
Commercial or Mercantile Credit
- Credits extended by one businessman to another
- Merchandise credit or trade credits: manufacturers extend credit to wholesalers and retailers
- Generally unsecured and short-term
Bank Credit or Bank Loans
- Granted by banks to finance short-term credit needs
- Repayment is oftentimes done within a short period due to fast goods turnover
Export and Import Credit
- Export credits: finance the selling of goods outside the country
- Import credit: finance the buying of goods from other countries
Investment Credit
- Long-term borrowing for business enterprises
- Supports working capital requirements of the business
Agricultural Credit
- Credits given to farmers for:
- Crop production (crop loan)
- Livestock breeding (livestock loan)
- Farm development and improvement (agricultural time loan)
- Selling and distribution of farm crops (commodity loan)
Functions of Credit
Economic Benefits
- Reduces need for cash transactions and saves costs
- Facilitates exchange of goods and services and transfer of funds
- Stimulates and finances production in anticipation of demand
- Promotes domestic and international trade
- Allows banks to create more credit out of deposits
- Provides financial accommodation to industries
- Enables consumers to buy durable goods on installment basis
- Helps the government meet temporary and permanent financial needs
- Maintains economic stability by regulating money supply and interest rate
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Description
Explore the functions and benefits of credit, such as promoting economy in the use of money, facilitating exchange and remittance, stimulating production, and supporting trade activities, including foreign trade. Test your knowledge on the various aspects of credit.
