Pros and Cons of Interest Income and Non-Interest Income in Bank
Pros (Advantages) of Interest Income
The first advantage of interest income is interest income is more sustainable and high quality of earning to a bank from loan, share financing, hire purchase and others. The interest from a loan is a fixed interest agreed to charge by a bank to the borrower with a certain period of time. If the borrower is responsible, the repayment will be made in a due date with the actual amount. The hirer, the person who has option to buy goods in accordance is required to pay the monthly installment to the bank under the hire purchase agreement. This kind of payment is sustainable as the hirer has already signed the agreement with the bank. The goods will be obtained by bank if the hirer
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The non-interest income from annual fees, transaction fees, monthly account service fees and others also a kind of profit for the bank. For example, a bank will not collect only the interest from loan but it will assists customer to make the payments to the same beneficiaries such as money to their children studying overseas. The bank will only charge them a certain amount of service charges.
The next advantage is the bank will get a fixed amount of repayment and charges from penalty fees, late fees or over-the-limit fees. With banks and same institutions, a major source of non-interest income is the fees according with the management of customer accounts. For instance, a financial record may be organized to permit a little charge to be charged from the client's record on a month to month premise. It is also called an administration charges, is use to return for such assignments as presenting charges and credits on the record and supplying the client with a month to month articulation of record.
Cons (Disadvantages) of Non-Interest
This question seems to come up a lot, so I figured that it's time to address it with an article. The best way to answer the question is this way: In bankruptcy, SBA guaranteed debt is treated like any other debt. It gets no special treatment because it carries an SBA guarantee. In many cases, the fact that the loan is SBA guaranteed never enters the equation. Why?
Financial decisions are something that we studied in this class. There are companies that have to decide many things about finances. They have to decide if they want long-term financing or short-term financing. They must go through a decision process. Many factors, including interest rates and terms of the loans can affect decisions. Many companies have financial forecasting to help make financial decisions. “Corporations would like many financing alternatives in order to minimize their cost of funds at any point” (Block, Danielsen, & Hirt, 2011,p. 169). Financing and money are a major thing that is referenced many times throughout the Bible. The book of Proverbs 22:7 tells us, “The rich rules over the poor, and the borrower is the slave of the lender” (Proverbs 22:7, ESV). The Bible teaches us that if you borrow, you are subject to the lender and any terms they may have. The Bible teaches us that money is not what is important in our lives. The book of Romans 13:8 tells us, “Owe no one anything, except to love each other, for the one who loves another has fulfilled the law” (Romans 13:8, ESV). That being said, it is very hard to have a business and have enough funds to be able to operate without ever having to borrow funds. You have to make sure that there is enough cash flow and not get into too much debt to be a successful business. Businesses have to make many financial decisions. Every person out there has to make many financial decisions within their lives. We should all follow God’s word as much as possible. Personally, if we do this then we will not let money or finances be the main focus in our lives.
If you are like most consumers, you have noticed the huge amount of fees banks are charging lately. We as consumers are overloaded with fees. We are charged for ATM withdrawals, overdraft fees, and statement fees. Sometimes of these fees are our fault; we might enjoy convenience, but we may not give enough considerations to the cost. You might be fed up with these fees, and looking for ways to stop paying those fees. You can achieve this for with minor modification.
Thesis: Businesses deem financing necessary when they are just beginning, expanding, or recovering; Debt financing and equity financing have many advantages and disadvantages but also change the entire accounting method that is to be considered while running the business. Debt financing has both advantages and disadvantages. Debt financing is a business’ way to start up, expand, or recover by borrowing money from a person or company. The money borrowed has to be paid back along with the interest that was accrued during the length of time the loan was carried out. This option is great for company’s that do not want investors.
Right now, companies such as Western Union, Moneygram, Paypal, and the more commonly used Visa and Master Card are making billions and billions of dollars each year in transaction fees.
Numerous amounts of people have financial problems when they get out of high school, so what should the school board do? In 2007, thirty-four out of fifty states have personal finance courses in their curriculum (Bernard 4). A financial literacy course seems to be what a majority of states are doing. Financial literacy courses have their pros and their cons just like everything else. Financial literacy courses bring up some very important questions.
A Bank loan can be defined as, money lend to an individual or business, to be repaid with an agreed interest at an agreed time. A bank loan is generally issued when the borrower is deemed creditworthy. (Markova & Petkovska-Mircevska, 2009, P. 6). A banks priority is to ensure that it will recover its loan with interest in due time. For this reason they pay particular attention to the cash flow of the borrower. The want to be sure the borrower will be able to repay the loan instalments with interest without too much stress on the day-to-day operation of the business. They also require a collateral in case the borrower fails to honor his
High school seniors takes deep breaths and parade onto the stage. The beginning of a new chapter awaits as they make the journey from one point of the stage to the end. They reflect on what they have been taught in those many years of high school. The most terrifying fact while graduating high school is the next step: making it on their own. Because they have taken part in the appropriate classes, the students are certain that they have gained the correct knowledge to begin making their mark on the world. In high school, it is crucial to achieve the appropriate classes in order to feel ready to take on the world ahead as an adult. However, many students lack proper education. One key example is financial literacy. Financial literacy is the
As the world has recently passed through the global financial crisis that begun in 2008 in the USA with the banks’ collapsing, analysts are giving different opinions and making new economic hypothesizes about the origin of, as well as the process of different countries escaped from the crisis. Among all these new “theories”, the case of Islamic banks is interesting in terms of its nature and consequences. In my essay, I will try to highlight the basic principles of the Islamic finance, the reasons of the restriction of interest, the most important tools used by Islamic banks in economic activities and brief explanation of them, and finally my view point of the probable future improvement of the Islamic financial system.
For examples Interest when money become a commodity and bought and sold with guaranteed results of profitability or the increase of volume of money by using in the transaction. Such increase is the price of money and the price of that money is classified as Interest which is part of Riba.
Next, Islamic banking also are misinterpret as not profitable as it forbidden riba’ in its practices. Also, we need to aware the customers that Islamic banking not just an alternative for finacial approach, but it also provides better value to the customers.
Saving money brings security for any future expenses. The earlier in life an individual begins to save, the better they will be set financially in the years to come. There are several reasons why it is important to save money. A few of these reasons are for emergencies, retirement, and simply for luxury spending. Having money will benefit each of these examples.
Financial Sector includes the savings of households from their income. Money not spent is invested into the financial sector. Savings can be lent to other sectors, majorly the business sector, to make investments or to purchase capital goods. Upon paying back the loan, money is made through interest. The financial sector includes insurance companies, banks and real estate. The financial sector pays taxes to the Government. They receive revenue from interest on loans and repayment of
Clearing of bank mechanism include collection and payments of cheque, demand draft, payment regulate and dividend warrant etc. it’s a best service offer by the bank. It helps the customers a lot necessary role of commercial bank is to accept deposit and to honor cheque drawn upon them. Typically cheques are used for the payment making to account holder. Collection and payments of instrument are known as outward and inward clearing. During my training in clearing department Mr. Usman help me to improve my learning.
Bank profitability has always attracted the interest of academics, economists, and policymakers. With increasing regulation during the global financial crisis, however is gives an understanding of what drives bank profits is increasingly crucial. Literature that has examined bank profitability in many countries in the l...