Differences Between Fringe Banks And One Traditional Commercial Bank

2339 WordsApr 16, 201610 Pages
In this paper, I will explain my experience with three fringe banks and one traditional commercial bank. For fringe banking, I will be analyzing Money Mart, Xtra Cash and Loan Express Payday Advance and for the traditional commercial bank, I will be investigating the Royal Bank of Canada. For the tradtional bank I will be analyzing the differences in credit lines. Firstly I will look at the two key differences between Fringe banks and tradational banks. One key difference between Fringe banks and traditional banks is that Fringe banks do not provide the full finanical services that banks offer. This is due to the fact Fringe banks do have large revenues to cover the cost of operation. This lack of large revuene makes it so that customers have to pay a higer interest rate to compensate for the operational costs. Essentially the interest rate will be higher in order to cover for the cost of borrowing the loans. This is not seen in banks as they have large revenues to compensate for those costs. A second difference between Frige banks and the commercial banks is the credit score. Commerical banks require a 670 credit score while fringe banks need a 540 credit score. This can be attributed to the types of customers the respective types of banks are looking to attract. Fringe banks generally work with people who are risky while banks work with people who are not risky. Fringe banks work with risky clintile mailinly by helping them to achieve the payment by allowing them to
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