Personal Finance Banking refers to Personal Financing Services which is provided by the banks. This Personal Financing Service mainly contains the different types of loans,mortgage services and credit card services provided by banks.
Loans Provided by Banks
Banks provide various types of loans to their customers to help them in acquiring personal financing.
Loans can be broadly classified as Secured Loan and and Unsecured Loan. If we go by this classification, then the mortgage loan services fall under the type of
Secured Loan and Unsecured Loan type contains Credit Card Debt and the Personal Loans.
Mortgage Loan Service provided by Banks
Mortgage Loans are secured loans because under the mortgage loan service, banks provide loan amount to the customer on the basis of Amortization of any of the customer's property. This amortized property works as the
Security of the loan. In case the customer becomes defaulter or fails to repay the loan amount to the bank, then the bank have the right to sell that amortized property to cover the loss.
Basics of Mortgage Loan
When the banks provide mortgage loans under Personal Finance Banking service, then they naturally charge interest from the borrower. The borrower has to repay the principal amount along with the interest part. This
Interest can be charged by the bank at a fixed rate for the whole
Term Period of the mortgage loan or it can vary also after a specific time period.
Generally, we find that the mortgage loan carries a long term period of 20 to 30 years. For this whole period the borrower may pay the bank a fixed amount at regular intervals or it may happen that the payment amount changes with time period. This is not decided by the banks but by the customers who have taken the mortgage loan from the bank.
Customers can also repay the loan before the completion of the term of the loan. But, in this case of
Prepayment of the Loan, the Banks generally impose a
Penalty as they are losing some interests which they expected to gain.
Credit Card Service Provided by Banks
Credit Cards are a popular form of Personal Finance Banking. A credit card holder can purchase a thing even if he is not having sufficient money in his bank account. Using the credit card he makes the purchase and the amount is actually paid by the bank, whose credit card the customer is using. This money is paid back by the customer to the bank with due interest. In this way, the bank finances the customer's personal needs and in return acquires good amount of interest.
Personal Loans provided by Banks
Banks provide Personal Finance Banking services to the customers through the personal loans. These personal loans carry heavy amount of interest to be paid to the banks. But, these personal loans can be used for any purpose according to the preference and need of the customer.
Other than these above discussed form of Personal Finance Banking, there are other mediums also that the banks use to provide personal finance.
The other types of loans which construct Personal Finance Banking service are:
- Home Equity Loan
- Car Loan
- Education Loan