Notes

Financial Sector - The Financial Services Sector on the Credit Rating Scale
Financial service providers in the UK include all financial institutions and individuals who provide financial services to customers. These financial service providers are categorized into different groups based on their services. This classification is done for the ease of understanding the purpose and to facilitate effective management. The different financial service categories in UK are also classified on the basis of their products and services.

Financial service providers in UK offer a wide range of financial services including lending, mortgages, insurance, investments, pension, capital formation, retail cash management, wholesale cash management, commercial financing, investment banking, merchant cash loans, retail merchant cash loans, commercial invoice validation, non-bank payday loans, non-business payday loans, business cash advances, and cash advance processing. Other financial services provided by financial service providers in UK are estate planning, probate services, asset protection and corporate debt recovery, tax returns preparation and settlement, legal initiation and advice, superannuation and pension fund management, estate administration, probate avoidance, and structured settlements. All these financial services providers operate in the same way. They provide financial advice as well as credit counseling services to help you manage your finance s.

The scope of activities of financial service providers is fairly broad. As far as consumer credit is concerned, it is very big in UK. Many consumers in UK use credit cards for purchases and payments. Therefore, the financial sector is largely dependent upon the credit card sales. On the other hand, mortgage loans form the other largest source of financial products sold by lenders to borrowers.

Many financial service providers follow various policies to cover the risk involved while providing financial products. Some of these policies cover risks arising from the nature of the products and the borrowers' credit profiles. For instance, some policies cover risk from default payments, prepayment penalties, purchase on credit and self-certification mortgages. These cover risks mainly due to the fact that these loans are provided to borrowers without any security. The most important advantage of these loans is that they are easily available as there are no documents required to be provided by the borrower.

Many factors decide the rate of interest applicable on the loans offered by the financial sector. These factors include the type of loan, the credit profile of the borrower, the financial sector, the rates of interest prevailing in the market, and the borrower's repaying ability. Most of the borrowers prefer a loan with a low rate of interest. If the loan amount granted by the commercial bank is large enough, the commercial bank takes the risk of repaying a large sum even if the amount is not repaid in time.

Many financial service providers also provide financial services at discount rates. Discount rates offered by these providers are calculated by dividing the annual confirmation fee of the financial service provider by the number of loan availed. In other words, the discount rate is the rate of interest to be paid by the borrower for availing the loan. A small number of financial service providers charge annual confirmation fees.

Many financial service providers also provide financial advice to borrowers. Financial advice providers can be categorized in two categories. There are financial advice providers who give financial advice on a direct basis and there are other financial service providers who provide financial services through agencies. Direct financial advice providers provide financial guidance to individuals and companies on an informal basis while financial service providers who provide financial services through formal methods are known as financial investment advisers.

Commercial banks provide financial services to everyone irrespective of their credit ratings. However, to get competitive advantage, most of them offer financial services at discounted rates to people having poor or adverse credit profiles. People having bad or substandard credit can make use of the institutions providing financial services at low interest rates to gain access to financial sectors. They may not be able to take advantage of all the provisions that the mainstream banks provide but they certainly will be able to cover risk factors.
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