Semester "Spring 2010"
"Consumer Banking (BNK603)"
Assignment No. 01 Marks: 20
"Case Study"
Mr. A and Mr. B are friends; both are teenagers (18 years old) living together in Lahore,
thought they must have their own conveyance and decided to buy a car. They searched a second
hand Honda City of 2006 model for Rs. 624,000. Both of them had the combined savings of Rs.
150,000 only and for rest of the amount they decided on a loan organized by a dealer. The
salesman said that the repayment would be Rs. 3039 per week for three years and they agreed
to put the deal in MR. A's name. At the time of making the agreement the salesman questioned
their ability to repay the loan and started confusing them with talk about guarantor and security.
Salesman asked either of the boys had to bring someone who could go guarantor for them. One
of the boys Mr. A brings his uncle Mr. C who is currently working in a firm to go as guarantor.
On the next day they finalize the paper work. The salesman also collected the cash.
Mr. C thought by signing all the papers he was making it easy for his nephew and his mate to
buy a car. He was totally unaware of his responsibility or the financial implications that he was
getting into.
After few days when the final documents reached from the finance company, terms of the loan
had been changed from 3 years to 5 years. Altered terms of the loan were shocking for both of
them but as the weekly payments were the same they did not worry about it.
Few weeks later the guys had a row and parted with Mr. B going back to native town to live.
The outcome was that Mr. A as a first year apprentice, could not afford the loan on his own, but
as his name appeared in all the documents so he was equally responsible. The problem got
worse as he had lied about his age; he was only 17 when he signed the loan documents. He left
a few days after Mr. B to join him in his native city without making another payment. Four
months went by without a payment being made. When Mr. A did not meet his repayments the
finance company looked into the matter. At last Mr. C was contacted by a legal letter from the
finance company advising him that he owed the balance of Mr. A's loan and other costs which
amounted to Rs.790, 140.
i.
What should Mr. A and MR. B have done to get into this deal? (10)ii.
What should Mr. C have done to avoid himself from the situation he faced? (10)>>>> Follow these Group rules if u want to stay long in group: <<<<
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