Week 1 Categorize Commercial Banking and Financial Institutions
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Categorize Commercial Banking and Financial Institutions
First & Last Name
School of Business, National University
Course code: FIN -7014
Date: Nov 30, 2023
Professor: Dr. Mark Harris
10
Categorize Commercial Banking and Financial Institutions
Financial institutions come in many varieties around the world. Some financial institutions serve the general public with their products and services, while others focus their services on specific consumers (Kumar, R. (2014). Consumers can choose from an array of products and services offered by each company. The development of financial institutions is a necessity for the society, which is why it is fundamental to understand how they differ from the types of institutions that will best serve the individuals' needs.
Below you will find a list of nine common financial institutions.
The difference between them will be explained along with what they do, how they work, and which type of customers they serve.
Each type of institution will also be illustrated by a few examples. Financial institutions can be classified into nine major types:
1)
Insurance Companies
The purpose of insurance companies is to provide protection against potential losses in the future.
Individuals and businesses buy insurance policies from them.
Policyholders pay premiums to cover the company's expenses, such as claims payouts and administration.
Life insurance, health insurance, auto insurance, and homeowners' insurance are some products offered by most insurance companies.
Long-term care and annuities are also available from some
companies.
Generally, you can count on your insurance company to be there for you in times of need.
Car insurance, for instance, can help cover the damages if you're in a car accident.
Medical treatment will be covered by one’s private medical insurance if one gets sick.
2)
Credit Unions
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Credit unions are financial institutions owned and operated by their members.
The services provided by credit unions are similar to those offered by banks, but they are typically much smaller.
Most credit unions serve specific communities or regions, and they tend to be more localized.
The credit unions are non-profit organizations.
Therefore, they do not have shareholders expecting to earn a profit.
Instead of using their profits to benefit themselves, credit unions offer their members cheaper rates and lower fees.
In addition to saving accounts, current accounts, loans, and credit cards, credit unions offer many other services.
Furthermore, they offer
certificate of deposit (CD) products and pension funds.
Personal service and competitive rates are the hallmarks of credit unions.
It is often more affordable for borrowers with less-than-
perfect credit to work with these lenders, and they typically charge lower fees than banks.
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3)
Mortgage Companies
Financial institutions specialize in lending money for home improvement projects.
Whether a person is buying a new home or refinancing an existing loan, mortgage companies can
assist.
In most cases, mortgage companies determine how much borrowers can afford to borrow before helping them find the best loan.
There are many types of mortgage products offered by mortgage companies, including fixed-rate mortgages, variable-rate mortgages, and discounted mortgages.
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