James Addington has been your customer for the past forty years, and is due for retirement in the next three years. He has applied for a short term loan of three years to enable him to roof his building and internal fittings and painting of the house. He estimates that it would cost him GHC 80,000,00. He is currently residing in rented accommodation for which he is paying a monthly rent of GHC 1,500,00 per month. He is the Principal Director of the Ministry of Agriculture and earns a net monthly salary of GHC 12,000,00.
He has operated a satisfactory account until in recent times when his revolving overdraft of GHC 5,000,00 has been drawn to the hilt. His retirement home is a four bedroom storey building located close to Aburi. In addition to the revolving overdraft he has a car loan balance of GHC 18,000 with six months to pay. He is already in arrears of two monthly instalments. The monthly instalment on the car loan amounts to GHC 3,000,00.
You notice the following outgoings on his account with you:
Standing order to Hire Purchase Company 500,00
Electricity Bill 350,00
Water Bill 200,00
Life Insurance 300,00
Health Insurance 200,00
The following information is also gleaned from his personal loan application form
Petrol expenses 1,000,00
Housekeeping expenses 1,000,00 per week
You have observed that he uses two different cars, a Mercedez Benz, which your bank financed and an Opel cadet Car, which he indicates to you is ten years old. He has been a source of good business introductions to you and so you really wish to assist him. He has offered to support the application with a security over his share certificate in an unlisted company, Bonreve Ltd., a manufacturer of cocoa beverages. The shares have a nominal value of GHC 5.00 per share and he holds four thousand of the shares.
James is married and has seven children who are all still in school. The first three are in the university and he pays school fees of GHC 5.000.00 per semester for each of them.
The next three are in senior high school and he pays GHC 1.000.00 per semester for each of them.
The last child is in Junior High School and he pays school fees of GHC 1.500.00 per term.
He is pleading with you to consolidate all his outstanding loans with you as well as the facility owed the hire purchase company.
How would you respond to his proposition?
[20 Marks]
