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Questions and Answers
Does the company consider the following data concerning the general business entity when evaluating credit applicants?
Does the company consider the following data concerning the general business entity when evaluating credit applicants?
Does the company evaluate the following factors concerning the credit applicant's supplier payment history?
Does the company evaluate the following factors concerning the credit applicant's supplier payment history?
Is the reliability of financial information on credit applicants considered, including the extent of outside CPA involvement?
Is the reliability of financial information on credit applicants considered, including the extent of outside CPA involvement?
What credit scoring techniques are used to evaluate creditworthiness?
What credit scoring techniques are used to evaluate creditworthiness?
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Open-ended loans allow borrowers to borrow repeatedly against a credit limit.
Open-ended loans allow borrowers to borrow repeatedly against a credit limit.
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Study Notes
Credit Procedure
- Describes the rules for granting credit in recognition of prior learning, how to apply for credit, and the bases for assessing credit applications.
- Evaluates credit applicants based on various factors, including:
- General business entity
- Supplier payment history
- Banking relationship
- Reliability of financial information
- Financial information evaluation and trending
- Credit scoring techniques (Expert Opinion, Statistical, or Hybrid)
- Ability to pay bills promptly
- Comparison to peer group companies
- Special process for riskier accounts
- Time frame for credit decisions
Credit Approval and Administration
- Includes:
- Terms of sale
- Terms codes
- Credit instructions
- Credit recommendations
- Credit files
Credit Process in Philippine Financial Institutions
- Involves three stages:
- Initiation stage
- Documentation and closing
- Portfolio management
Collection Procedure
- Defines the set of procedures for the collections team to follow, aiming to apply to all customers consistently and flexibly when necessary.
- Includes:
- Normal procedures
- Collection schedule
- Lockbox system
- Advance payments
- Customer deductions
- Note arrangements
- Account referral
- Creditor's extension agreements
- Bankruptcy proceedings
- Allowance for uncollectibles and write-offs
Target Market Identification
- Defines a target market by similar characteristics, such as demographics and behaviors.
- Refines target customers through factors like:
- Where they shop
- What brands they like
- What newspapers they read or websites they visit
- What life events they are experiencing
Pre-Screening of Loan Applicants
- Involves making unsolicited offers of credit or insurance to consumers who might be in the market.
Loans
- A loan is a thing that is borrowed, especially a sum of money that is expected to be paid back with interest.
- Types of loans:
- Secured loans: rely on an asset as collateral, with lower interest rates.
- Examples: car loans, property loans
- Unsecured loans: rely on credit history and income, with higher interest rates.
- Examples: credit card debt, personal loans, bank overdrafts
- Open-ended loans: can be borrowed over and over, with a credit limit.
- Examples: credit cards, lines of credit
- Closed-ended loans: cannot be borrowed once repaid, with a fixed balance.
- Examples: mortgage loans, auto loans, student loans
- Term loans: for business purposes, with a fixed interest rate, repayment schedule, and set maturity date.
- Examples: short-term, medium-term, long-term loans
- Secured loans: rely on an asset as collateral, with lower interest rates.
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Description
This quiz reviews the rules and process of granting credit in recognition of prior learning, including how to apply for credit and assessment bases.