Consumer Lending and Borrowing参考.ppt

Consumer Lending and Borrowing ? Learning Objectives ? To see the vital role played by consumers in supplying loanable funds through savings to the money and capital markets. To learn about the important role consumers play as major borrowers of funds. To explore the characteristics of consumer lending institutions. To understand the rights that consumers have with respect to financial services. Consumers as Lenders of Funds Consumers as a group are among the most important lenders of funds in the economy. Loanable funds are supplied by consumers – individuals and families (households) – when they purchase financial assets from other units in the economy. Financial Assets Purchased by Consumers The Growing Menu of Savings Instruments Available to Consumers Today One of the most important trends affecting consumer savings and lending today is the explosion of new financial instruments. Many of these new instruments offer the consumer greater financial flexibility, as well as the potential for higher rates of return. The Growing Menu of Savings Instruments Available to Consumers Today Examples: NOW accounts / share drafts automatic transfer services (ATS) share accounts at money market mutual funds consumer cash management services universal life insurance individual and Keogh Plan retirement accounts Roth and Education IRAs money market and market-index CDs variable-rate annuities and insurance plans Consumers as Borrowers of Funds Is Consumer Borrowing Excessive? Categories of Consumer Borrowing Financial analysts frequently divide the credit extended to consumers into three broad categories. Residential mortgage credit – used to support the purchase of homes Installment credit – used primarily for long-term nonresidential purposes Noninstallment credit – used for short-term cash needs Home Equity Loans Like traditional home mortgages, a home equity loan is secured by a borrower’s home. Unlike traditional home mortgages however, many home equity loans consist of a r