Types of credit sales - SS2 Commerce Lesson Note

Mortgage:

A mortgage is a type of loan specifically used for purchasing real estate, such as a house or property. When you take out a mortgage, the lender provides you with the necessary funds to buy the property, and you agree to repay the loan over a specified period, usually through monthly installments. The property serves as collateral, meaning that if you fail to make the payments, the lender can take possession of the property.

Loan:

A loan is a sum of money borrowed from a lender, which can be a bank, financial institution, or individual. Loans can be used for various purposes, such as financing a car, funding education, or covering unexpected expenses. The borrower agrees to repay the loan amount with interest over a predetermined period. Loans can be secured, where collateral is provided, or unsecured, where no collateral is required, but interest rates may be higher.

Overdraft:

An overdraft is a facility provided by a bank that allows you to withdraw more money from your bank account than what is available in the account. It creates a temporary negative balance in your account, and you are charged an interest or fee on the overdrawn amount. Overdrafts are typically used to cover short-term cash flow shortages or unexpected expenses.

Credit Deferred Payment:

Credit deferred payment refers to a buying arrangement where you make a purchase but delay the payment for a specific period. It is commonly used in retail, where you may buy a product and agree to pay for it in installments or after a certain period, typically with no or low interest. It allows you to acquire goods or services immediately and pay for them over time.

Finance Houses/Leasing:

Finance houses or leasing companies provide financing options for acquiring assets such as vehicles, machinery, or equipment. Instead of purchasing the asset outright, you can lease it from the finance company. Leasing involves paying regular installments for the use of the asset over a specified period. At the end of the lease term, you may have the option to purchase the asset, renew the lease, or return the asset.