Products and Providers
Consumer Credit Consumer credit gives you the ability to purchase goods and now and pay for them later. The most widely used form of consumer credit is a credit card.
Example:
Mastercard - Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "MasterCard" brand debit and credit cards to make purchases. MasterCard Worldwide has been a publicly traded company since 2006.
Housing loansPeople apply for home loans that want to buy a home or other personal property but don’t have the funds to pay for it all at once.
Example:
RAMS- RAMS has developed a strong and stable reputation in the marketplace for its range of innovative and flexible home loan products which offer home loan solutions to suit the needs of every Australian. RAMS Home Loans was designed specifically to offer Australian home buyers a competitive source of finance and a flexible, customer-oriented alternative. RAMS offers a number of different home loans that can be chosen.
Business loansPeople who want to buy or expand a business apply for these types of loas from financial institutions such as finance companies and banks.
Example:
The L.J hooker website is very informative for someone who wants to either rent or buy land/a building to start up a business. There are links that enable you to calculate your mortgage online! There are also different types of loans that are on offer, for example:
Variable interst loans- Your interest rate will vary, up or down, as interest rates move with the economy. In many cases this type of loan allows full offset of salary and surplus funds against your home loan to reduce the balance owing.
Line of credit loan - Similar to a secured overdraft, a Line of Credit loan allows your equity to work for you by providing a revolving line of credit with repayment flexibility to suit your personal needs.
Short term money marketThe short-term money market describes a market where participants including banks and other major financial institutions trade very large volumes of short-term debt instruments including bank bills, promissory notes, bank issued certificates of deposit and other short-term interest bearing securities.
Example:
All banks have the option of using the short term money market deposit scheme. The ANZ bank has short term investments with an agreed rate of interest. The minimum deposit that ANZ accepts in $250, 000. The short term money market deposit is deposited on; an over night basis, for 7 days, and then reinvested on an overnight basis until you withdraw it providing the bank with 24 hour notice, or an agreed period (term deposit).
Bond MarketA bond is a debt security, similar to an I.O.U. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity known as the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it “matures,” or comes due.
Example: There are a number of different bonds that are on offer, you choose depending on your financial situation. There are too many bonds to outline them all, so the focus will be the municipal bond. Municipal bonds are debt obligations issued by states, cities, counties and other governmental entities to raise money to build schools, highways, hospitals and sewer systems, as well as many other projects for the public good. When you purchase a municipal bond, you are lending money to an issuer who promises to pay you a specified amount of interest (usually paid semi annually) and return the principal to you on a specific maturity date.Not all municipal bonds offer income exempt from both federal and state taxes. There is an entirely separate market of municipal issues that are taxable at the federal level, but still offer a state—and often local—tax exemption on interest paid to residents of the state of issuance.
Share MarketThe share market is for the buying and selling of shares, options and rights of publicly listed companies on the Australian Stock Exchange. Shares give their owner a share in the ownership of a company and a right to a dividend and capital gain if the value of the share increases. Market capitalisation is the total value of all shares listed on the share market.
Example:Australian Stock Exchange (ASX) www.asx.com.au
Financial FuturesThis is the market for buying and selling of contracts at a later date for a certain price. Some traders in this market speculate on price movements. The market is derived from primary market financial instruments such as share and bill futures and swaps.
Example:In the Australian Stock Exchange there is the sector for Australian Wool Futures. The operation of the wool market presents growers, local merchants, local exporters and offshore mills with different risks. For the grower the risk is that if they are exposed to low wool prices, then they wont be able to fund the maintenance costs, production costs, and the financial charges. For the local exporter the risk of high wool prices is relevant. They want to buy the wool at a lower price and then export it for a higher amount so they can make a profit. The local merchants are exposed to both high and low prices. They need to protect their positions and their profits through the process of hedging. Offshore mills are exposed to the risks of high wool prices. They need to be able to make a profit and fund the mean of production and control the input costs of their milling operations. To alleviate these risks the above parties can enter into financial contracts (futures) to fix the sale or purchase price of wool in advance. This provides certainty, as the profit/loss made on the financial contract should offset the impact of unfavourable/favourable movements in the physical market. Wool futures link
Foreign Exchange This is the market where foreign currencies are bought and sold. The market operates 24 hours a day to facilitate international transactions that need foreign currencies, such as the transactions carries out by investors, speculators and those involved in import or export industries.
Example:All banks offer to exchange currencies. You can either exchange at a bank or a currency exchange booth. When exchanging with Westpac orders are accepted for values between $250 and $20,000 AUD. It will only take a few minutes to complete your order and you can pay using BPAY® via Internet Banking or Telephone Banking.
