Thus provides more and more employment opportunities in the country. Demand for consumer durables, further investments in consumer durables industry, increased living standard of people, improved employment opportunities and income etc. Increased demand leads to large scale production. Large scale operations lead to the economies of large scale operation.
This in turn leads to lower prices. Consumer credit is of national importance in India. Unless there is such a convenient mode of financing, total demand for consumer durables will be far lesser. Poor demand lead to lower production, which in turn lead to poor employment opportunity and lower income level.
All these finally land the economy in trouble. This may land these people to debt trap within a short while.
This ultimately spoils their life in the long run. Along with the convenience that it offers it charge the customer for all these conveniences offered. Thus it becomes costlier when compared to other forms of finance. The economic development posed by the impact of consumer credit is not real but artificial.
Economy will take years to stabilize the artificial boom claimed by the proponents of consumer credit. By whatever name called credit is always risky so is the case with consumer credit as well. Defaults are a major threat to consumer credit. Once there is a default, repossession and other legal formalities are difficult.
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Artificial boom and depression leads to economic instability and causes chaos in the economic progress. It will be difficult for the real ordinary business man to identify real progress and artificial progress. Always the financier should assess the repaying capacity of the customer before advancing money.
To assess the credibility and repayment capacity of a customer several methods are made use of. Those methods which are used to assess the credit worthiness and repaying capacity of a customer are called consumer credit scoring methods or credit rating methods. These methods provide standards for accepting or rejecting a customer and assess the credit worthiness of a customer.
It is ranked out of a total of An applicant scoring more than 70 points is considered as one with good credit standing. This method is another credit rating formula. It give emphasis to i Age, ii Gender, iii Stability of Residence, iv Occupation, v Type of Industry, vi Stability of Employment and vii Assets of the Customer in assessing the credit worthiness of a customer. Specific scores are allotted to each of these parameters.
The borrowers getting a score more than 3. This method is based upon the amount of down payment, monthly income and length of service. Basically this method is based upon the present financial position and future income earning capacity of the customer. Generally this method is used in government Departments to advance loans to its employees. The loan amount to be sanctioned is calculated using the following formula. Like any other mode of finance, consumer finance also has certain costs.
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Normally financiers charge interest for the capital, service charges for the services rendered and other charges. The financiers used to charge the customer for all the services rendered to the customer. Generally service charges will be collected as percentage of borrowings. Interest will be disclosed either on flat rate of interest or yearly declining balances rate, net interest rate, etc.
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The effective rates of interest for consumer finance are higher than other modes of finance. This is because consumer finance is provided based on the integrity and credibility of the customer alone. As the banker is undertaking higher risk, a higher rate of interest is charged as a premium for the extra risk undertaken. Interest comprises of risk free rate of interest for the capital and a premium for default in future payment of premium.
In India there is no ceiling as to the maximum rate of interest. Financiers charge different rate of interest as per the policies and practices of their organization. On an average, in India, the effective rate of interest on consumer finance ranges from 20 percent to 30 percent. Other charges include documentation fees, processing fees, management fees, examination fees, service charges, brokerage, collection costs etc. Interest, service charges, other charges, security deposit, guarantee etc.
However because of the practical convenience and feasibility of schemes attracts more and more people to consumer credit schemes. Consumer credit portfolio refers to the combination of various consumer credits granted by an organization. Consumer credits may be classified according to the tenure of repayment, amount of credit, type of customers, mode of credit, type of security offered, etc. The degree of risk and return varies in each case. The total of all consumer credit granted by an organization to various parties under various forms upon different terms and securities is called its consumer credit portfolio.
Like any other business, consumer financing is also a business set up to make profit. Thus profit maximization is its objective. The ultimate aim of portfolio management is to maximize profit. The portfolio must be perfect, balanced and well managed. The evaluation of the existing consumer credit portfolio, for its credibility, forms of credit, the amount of credit, the risk involved, and to make suggestions wherever necessary, so as to achieve the organizational objective can be termed as consumer credit portfolio management.
It shall not give much stress to any particular type of credit alone. It shall keep a balanced portfolio comprising of all types of credits. The tenure of the credits is to be closely watched. A prudential trade off shall be kept between secured and unsecured credits. Both have their own merits and demerits. Secured credits are sure to get back but have lower rate return. Unsecured ones are risky but have higher return. The total credit to a single customer is to be checked frequently, as undue credit to one may land the customer in difficulty and thereby the financier as well. For assessing the credibility of the advances scientific tools may be used to analyze the credit worthiness of the customer.
Consumer finance market is growing rapidly in India.
The last decade witnessed steady growth of consumer credit market in India. Growing consumer appetite for consumer durable goods like appliances and other convenience needs, developed and competitive market for such consumer goods, expectations of future income, potential for increase in future income, The tendency of people to borrow early in life and enjoy etc.
Recently the reduction in the rate of interest and flexibility in the purchase schemes fueled the rapid growth of consumer credit industry. There are number of schemes with alternative payment schedules and rate of interest placed before the customer for selection. It is up to the customer which one to select. Another change in the Indian economy is the increase in the startup salary scales and pay structure.
The pay structure has been increased considerably when compared with what it was ten years back. This has changed the purchasing preferences of middle class families. People have started tasting the fruits of modern life which lands them to more and more needs. Changes in the life style, living standard and life perspective of Indian middle class families were another important recent change in the consumer durables industry. People have started dreaming and trying to convert their dreams to realism.
Many have started visualizing a kingly life and wish to live with as many facilities possible. As our online presence continues to grow, the way we make online purchases will continue to evolve. Digital marketing is important because more and more consumers are online; digital marketing is an immediate way to reach them. Traditional marketing can no longer reach people quite like digital marketing. In order for digital marketing to succeed, businesses need to recognize the importance of using many different digital marketing channels.
A recent Clutch survey found that the digital marketing channels businesses use most are social media marketing 81 percent , websites 78 percent , and email marketing 69 percent. Social media, email, and websites give companies the ability to reach consumers directly, which means customers are receiving more information in digital form than ever before. SEO is left behind when it comes to popular digital marketing channels.
Businesses are least likely to invest in SEO compared to other channels. Clutch found two reasons for this.