Podcast
Questions and Answers
Which of the following is NOT a function of credit?
Which of the following is NOT a function of credit?
What is a characteristic of credit that is NOT mentioned in the text?
What is a characteristic of credit that is NOT mentioned in the text?
How does credit benefit consumers?
How does credit benefit consumers?
Which of the following is NOT a function of credit according to the text?
Which of the following is NOT a function of credit according to the text?
Signup and view all the answers
What is the role of credit in maintaining economic stability?
What is the role of credit in maintaining economic stability?
Signup and view all the answers
Which of the following is a characteristic of credit according to the text?
Which of the following is a characteristic of credit according to the text?
Signup and view all the answers
What type of credit requires you to repay a fixed amount of money in regular installments over a specified period of time?
What type of credit requires you to repay a fixed amount of money in regular installments over a specified period of time?
Signup and view all the answers
Which kind of credit is typically an unsecured short-term type of credit extended by one businessman to another?
Which kind of credit is typically an unsecured short-term type of credit extended by one businessman to another?
Signup and view all the answers
What is the main purpose of the Truth in Lending Act (TILA)?
What is the main purpose of the Truth in Lending Act (TILA)?
Signup and view all the answers
Which type of credit allows you to borrow up to a certain limit and repay it over time, enabling repeated use?
Which type of credit allows you to borrow up to a certain limit and repay it over time, enabling repeated use?
Signup and view all the answers
What type of credit is granted by banks to businessmen to finance their short-term credit needs?
What type of credit is granted by banks to businessmen to finance their short-term credit needs?
Signup and view all the answers
Which form of credit aims to finance the selling of goods outside the country?
Which form of credit aims to finance the selling of goods outside the country?
Signup and view all the answers
Study Notes
Functions of Credit
- Reduces the need for cash transactions and saves the cost and risk of issuing and carrying money.
- Facilitates the exchange of goods and services and the transfer of funds from one place to another.
- Stimulates and finances production in anticipation of demand.
- Enables the expansion of both domestic and international trade.
- Allows banks to create more credit out of a small amount of deposits.
- Provides short-term and long-term funds to industries for their development and growth.
- Enables consumers to buy durable goods on installment basis.
- Helps the government to meet its temporary and permanent financial needs.
- Helps to maintain the stability of the economy by regulating the money supply and the interest rate.
Characteristics of Credit
- A bipartite contract between two parties (debtor and creditor).
- A pecuniary contract expressed in terms of money.
- A fiduciary contract based on trust and confidence.
- Involves risk, with the possibility of the obligation not being paid.
- Always involves futurity, with payment on credit done at a future date.
Significance of Credit
- Helps achieve financial goals.
- Provides access to more options and opportunities.
- Helps build wealth and save money.
- Helps cope with emergencies and unexpected expenses.
- Helps maintain a stable and healthy economy.
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) and regulated by the Monetary Board of the Central Bank of the Philippines.
Kinds of Credit
- Revolving credit: allows borrowing up to a certain limit and repayment over time.
- Installment credit: requires repayment of a fixed amount in regular installments over a specified period.
- Open credit: requires payment of the full amount borrowed at the end of each billing cycle.
- Service credit: allows receiving a service now and paying for it later.
Types of Credit
- Personal credit: obtained for one's use, including service credit, retail credit, and personal loan credit.
- Commercial or mercantile credit: credits extended by one businessman to another businessman, including merchandise credit or trade credits.
- Bank credit or bank loans: granted by banks to businessmen to finance short-term credit needs.
- Export and import credit: financing the selling of goods outside the country or buying of goods from other countries.
- Investment credit: long-term borrowing for financing business enterprises and supporting working capital requirements.
- Agricultural credit: credits given to farmers for the development, improvement, and cultivation of their lands, including crop loans and livestock loans.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on the functions of credit, including its uses, classifications, and risks. Learn about how credit helps in economy, exchange, remittance, production, and trade promotion.
