Banks do play a crucial role in providing assistance to those who need some sort of boost when they do not necessarily have money. A customer may require capital to set up his business and if his/her plans are sound, then the institution should take the risk since they do ask for securities meaning even if the business does not do well, the bank will get back its money by selling off the property or assets given as security by the customer. Banks rely on those who borrow to earn profits since they do pay back with interest and these are the same people who will keep their money with them once they have enough.
People who are in heavy debt should not be given the money because it puts them into further debt. They are a potential risk for the institution as this may lead to huge losses. If a customer already has 50,000 pounds in debt and wants to borrow 10,000 pounds how is this person expected to pay the loan that exists plus interest. Financial institutions have to lend money to help their customers and also making money but the also have to cushion themselves against losses. 3a) savings account.
This works if your intentions are to save for a short period of time. This is a highly risky since you have easy access to the money so it can be misused. b) Money market insured accounts. This is great for long term purposes and the interests offered are higher. Less risk is involved as your money is secure but ones interest is determined by your balance. c) The risks to the bank can occur if the young borrower moves, refinances or defaults. The young borrower is not well established therefore may find it difficult to remit payments.
d) The type of person using the car will determine the premium. It can also be affected by the purpose for which you bought it and its characteristics. e) Money purchase pension plan means the employee does not know how much they receive and it is less than the final salary pension. An employee should consult his employer when his scheme. f) Using your account on line allows you to access your money from anywhere but puts you at risk since people may hack into the system and gain access to your account.
4) Financial institutions divide their customers into segments. These segments may include senior programs, trust prospects, credit card customers and home equity customers. Bankers do this in order to know exactly who they will target for a particular product that they have and the way in which they will approach the customer in terms of marketing. They have to know how to respond to the needs of their clients. The customers also benefit from this since they are given a product that suits them and will be of benefit to them.
Segmentation determines the success of a product. Bibliography. CliffsNotes. com, ‘Functions of Money’ <http://www. cliffsnotes. com/WileyCDA/CliffsReviewTopic/topicArticleId-9789,articleId-9745. html>. accessed 7 Jan 2009 Mintel International Group Ltd, Motor Insurance (Mintel International group Ltd, 2000) Mullineux, A. W. & Murinde, Handbook of International Banking (Edward Elgar publishing,2003) Vinten, G, International Journal of Bank Marketing for the Financial sector (Ebrary,Inc. 2005)
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