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Classifications of Credit

I. According to Type of User

1. Consumer Credit used by individual to finance or refinance the purchase
of commodities for personal consumption.
a. Convenient form of payment charge account involves purchases from
a retail store that are paid once or twice a month.
b. Aids in financial emergencies helps a consumer through a period of
financial stress.
c. Buying durables on installment financing the purchase of durable
goods by paying for them in installment.

Consumer credit can be :

a. Charge accounts non-durables, payable within two months or sixty
day term in four payments
b. Installment accounts durables, payable for more than 6 months to
one or more years. Payment is monthly and a down payment is needed before unit on
credit is delivered.
c. Revolving credit combination of charge and installment accounts.
Credit period is ninety days. The debtor can avail renewal after ninety days, or within
ninety days, for the paid portion, provided he had not been delinquent in payment of
the original loan.
d. lay away plan full payment of the product within a period is required
before delivery of the item is made.
Replevin creditors right to repossess the item under contract, that is the
durable good, in case that the debtor fails to fulfill his obligation.

2. Commercial Credit creditor and debtor are both businessmen.


Businessman to another businessman

Object of credits are merchandise or goods which are delivered

on consignment basis or under a credit term.

3. Commercial bank credit creditor is a commercial bank while the debtor

can be a business firm or privste businessman. Purpose is for business operations or

II. According to Purpose

1. Investment Credit extended by banks for company who intends to
purchase fixed assets
2. Agricultural credit intended for acquisition of fertilizers, pesticides,
seedlings, transportation of agricultural products and farm improvements
3. Export Credits uses letter of credit financing international trade
- importer letter of credit requires payment be made in
importers currency
- export letter of credit - requires payment be made in exporters
4. Real estate loan intended for the purchase of house and lot, for house
construction or improvement.
5. Industrial credit intended to finance industries like logging, fishing,
mining, quarrying and the like.

III. According to Maturity

1. Short-term loans payable within a period of one year
2. Intermediate term or medium term loans payable for a period of one to
five years
3. long-term loans payable for more than five years

IV. According to form of credit

1. cash form of credit
2. merchandise form of credit

Sources of Credit
1. Private Individuals individual money lenders who loan surplus income to those
in immediate need of cash. Do not require collateral. Often called as loan sharks
because they prescribe rate of 5/6 or over and above what the law provides.
2. Retail Stores offers merchandise form of credit.
- offers book account (palista) for customers of the stores and collection
period is during paydays of the month.
3. Pawnshops extend loans in exchange for a collateral, a pawn.
- pawn acceptable are personal property or movable assets
4. Savings and mortgage banks any corporation organized for the purpose of
accumulating the savings of depositors and investing them, together with its capital,
inreadily market bonds and debt securities.
5. Mutual savings banks they sell interest bearing savings deposits to the public
and acquire assets largely in the form of urban residential mortgage.
6. Savings and loans association organized to obtain funds for home construction
and majority of their savings are placed in home mortgage.
7. Credit union mutual institutions whose membership have some common bond,
such as employment in the same company.
8. Insurance Companies services offered to the public is financial protection
against lifes various misfortunes.

9. Pension Funds the procedure for pension fund is reverse of that for insurance
companies. The person who lives the longest beyond retirement receives the highest
return in investment, through the periodic pension checks he receives.
10. Bond and Money Market Funds companies which accept savings and place
them in a pool of investments that allows diversifications of assets.
11. Sales finance companies includes sales and personal finance companies which
make loans to individuals for the purpose of buying automobiles.
12. Banks commercial banks, savings banks, rural banks, development and
investment banks.