Pricing loans
The most difficult task in banking is to price the loans. Pricing must also cover a risk premium such as credit risk or market risk or foreign exchange risk. If the loan is granted in foreign currency, and the local currency shows a change in the face value that has to be checked to. Other wise, it would become a Bad credit car finance.
The prime rate should be there and in line with the LIBOR rates. The prime rate is the base rate applied to all the loans. The other changes needed to be made such as fixed rate loans or variable rate credit. The price leadership credit model is the simplest one to be used. The loan pricing includes 4 things; the cost bank has spent in getting funds, administrative costs (credit analyst pay etc) risk provision and some profit margin too. The pricing is dome on even Car loans too.
The loan pricing structure does not change, but strategies may. Some customer profitability analysis is also required at this stage. The Yes Car Credit can be there, but certain customer requirements need to be fulfilled carefully. This becomes a bit difficult for online banking and online installment payment systems. The line of credit can create a problem for the bank. The same balance can be managed if the customer holds a bank deposit too. If the customer holds a deposit at the bank, the rates would be changed.