Composite credit financing for Retail borrowers

Retail lenders under Credit Financing schemes

In the world of credit, many common folks undergo financing through various means; Long or Short term tenors. Retail borrowers often indulge in unhealthy loans to service extravagant mortgage payments and high-end branded goods. The credit continues to snowball into huge sums of interests and leaving the debtor saddled with piles of bills. Once things get out of hand, creditors will demand immediate payments and forced debtors into a mess. Lawyer letters are common ways of threatening and worse case scenario, driven out of luxury home through legal confiscation. However, nowadays, credit financing is getting more affordable with cash sloshing around in the economy. Professional financial institutions often promote lucrative schemes to entice borrowers in taking up higher loans and longer tenors.

Short term personal Loans

This segment was once the lowest generating revenue for corporate financing departments but as of current modernization, it seems that it is going to be one of the fastest increasing industry. Short term loans are usually for direct purchases. A common personal loan is for self-indulgence in leading a lavish lifestyle. High-end splurging in branded goods and expensive holiday trips are ways of spending credit in a swift manner. Without fail, European cars are part of credit financing when borrowers take up costly loans. It might have a chance to convert into longer term loans. Retail spending is part and parcel of consumer spending habits or widely known as Retail Therapy.

Long term loan tenor

Being one of the most lucrative segment, where non-finance competitors are looking to gain entry, financial institutions are ever-ready to lend massive amounts of cash upfront upon signing on the dotted lines. Mainly in the commercial banking, banks stacked up huge piles of reserves, regulations are extremely strict. When it comes to long-term retail loans, the banks need to have designated reserve ratio requirements before being legalized to distribute credit. Retail loans are catered mainly to mortgages for fulfilling housing needs. It is seemingly insane to see increments in bank loans over the years as retailers are looking to upgrade their lifestyles and finance using unearned cash. Putting 'face' value in front of costs, the repercussions could be deadly once sudden implications kicked in.

Power in Cost of Borrowings

An old adage goes with the saying of, "Don't underestimate the power in Cost of Borrowings". As an infamous scientist by the name of Thomas Edison, a renowned statement mentioned, "Compounding is the eighth wonder on this earth". The rest should be self-explanatory and evident. Based on past statistics, many borrowers - be it retail or commercial - defaulted on loans due to inability of financing interests payments and not principle. The key issue lies in the rolling credit interests after debtors are unable to remunerate monthly installments. The power of leverage can either build up wealth on a prudent basis or completely annihilate personal savings within a short period of time. In fact, the need to repay loans is draining up much resources and definitely detrimental to one's financial health in the long run. Terminate credit facilities if there is no need for usage.