Financial services are the economic services that encompass a wide array of industries that regulate the economy or are a part of economic governance. These may include credit unions, banks, stock brokerages, insurance companies, accountancy companies, investment companies, and others alike.
Some of these services are listed below. These financial services can benefit anyone, be it an individual or a commercial entity. The below listed financial services are briefly discussed with there benefits and also, to whom they benefit the most.
A loan is a borrowed amount of money, either from a bank or a financial service provider. The borrower has to pay back the principal amount borrowed as well as the interest levied upon the principal. Depending upon the individuality of the borrower, the loans can be divided into two categories:
- Commercial or Business Loans
The loans that are entitled to businesses, solely are referred to as commercial loans or business loans. The lender may wish to see the business’s accounts, balance sheets, or credit history depending upon the amount of the loan and the business model.
The commercial loans can further be classified on the basis of the financing service provider as SBA loans, mezzanine loans, or asset-based loans. SBA loans are the small business administration loans, generally dealt by local trade unions and the loan amount involved does not exceed $50,000.
Similarly, a mezzanine loan is borrowed against the equity of the company. You can choose for an asset-based loan if your credit score is not optimum and you have a dissolvable asset that you can borrow money against.
- Personal Loans
When a loan is sanctioned to an individual and not a commercial entity, the type of loan is referred to as a personal loan. Personal loans are limited to $50,000 only. Any individual can obtain a loan from a bank or a personal lender. Personal loans typically encompass car loans, title loans, home loans, etc.
If you are looking for a personal loan you can easily get a quote through online search at fasttitleloansnearme.com for free. A title loan is a type of personal loan in which the borrower has to surrender their car title to the lender.
There is another classification of the loans, on the basis of the collateral, the loan is obtained against.
- Secured Loan
Secured loans are those which are obtained against any collateral or guarantee of repayment. If the loan is not repaid in time and in full, the collateral may be sold by the lender to recover the amount of loan.
- Unsecured Loan
An unsecured loan does not have any collateral involved. Unsecured loans are indeed smaller amounts as compared to secured loans. The lender may use unwise or unjust ways of recovering the loan amount if it is not repaid, with interest.
Business loans or commercial loans are usually secured whereas personal loans are unsecured. For example, vehicle loans are generally unsecured loans as there is no collateral involved. In case the borrower fails to repay the loan amount, the bank or the lender may recover the vehicle against the outstanding dues.
Foreign exchange is one of the principal sectors that drive the economy worldwide. Individuals around the globe can buy and sell currencies. But the question arises, how does foreign exchange benefit, anyone? Individuals who buy and sell currencies, make a profit out of the difference in the exchange rates. A shark buyer can affect the rate of exchange of any currency. Also, this trade governs the overall economy of countries worldwide.
Another element of financial services is trading. Trading essentially refers to the buying and selling of stocks and equities of huge corporate houses or companies. Companies depending upon their business structure can either be public, private, or semi-private. These companies offer their equities to other businesses or the general public to raise funds.
The more a company’s equities are traded, the more it affects the evaluation of the company. Typically a stock trader makes a profit by buying a set of share at a cheap price and reselling it at a higher price. The fluctuation in the values of stock depends on various factors such as the trade rate, turnover of the company, and closing and opening of the stock market.
Insurance is a method of securing the assets against financial loss in the event of a contingency. It is used by business as well as individuals to secure their belongings and property against all sorts of contingent losses.
Vehicle insurance, medical insurance, business insurance, asset insurance, and property insurance are some of the common examples of insurance services. Depending upon the type of policy, the amount of principal, the commodity to be insured, and the history of the insured the premium and the return of the insurance policy is decided.
Every business needs investment, to begin with. Not all the innovators and entrepreneurs have the capital or the financial supplies to establish their business. An angel, known as an investor, steps in to help out these budding businessmen.
The process is known as investment banking. Typically a financing institution or an individual invests a huge amount of capital into an idea or business plan to help it establish, against a fair share in the company holdings.
Export And Import
There is yet another contributor to financial services. The export and import of goods across countries has a significant impact on the country’s economy and thus financial services. The more a country exports, the better would be its economy and vice versa.
People who trade in export or import of goods also similarly make the profit as any other business would — the margin between the buying price and the selling price.
Financial services as you would have understood by now are not just loans or insurance. There are many aspects and types of financial services. The above listed are the most commonly practiced and exploited. You can now begin exploring the opportunities that you have in the finance sector since you have an understanding of what it is and how it is beneficial.