Credit and Collection Practices on Loan Repayment among Home Appliance Dealers in Cateel: A Correlational Study

Abstract

This study examined the impact of credit and collection practices on loan repayment behaviors among home appliance dealers in Cateel, Davao Oriental, addressing the financial challenges these dealers faced due to customer defaults. Anchored on Credit Risk Theory, it explored how effective credit and collection strategies could mitigate risks and enhance repayment outcomes in a region marked by economic and environmental vulnerabilities. A quantitative descriptive correlational design was employed, involving 150 debtors from home appliance dealerships, selected through purposive quota sampling. Data were collected via a survey questionnaire that assessed credit practices (character, capacity, cash flow, collateral, condition, control), collection practices (documentation, manpower, procedures), and loan repayment factors (information, financial literacy, generation/reinvestment, social influence, perceived risk/value, self-control). Findings revealed that credit practices (x̄ = 3.89, s = 0.37) and collection practices (x̄ = 4.41, s = 0.51) were generally robust, although inconsistencies existed in collateral and cash flow assessments. Loan repayment behaviors were strong (x̄ = 4.10, s = 0.85), with social influence being the weakest factor among them. Regression analysis revealed that credit practices (β = 0.439, p < 0.000) and collection practices (β = 0.437, p < 0.000) significantly predicted repayment, accounting for 37.5% of the variance, with credit practices being slightly more influential. The study concluded that while credit and collection practices significantly enhanced loan repayment, addressing weaker areas, such as collateral evaluation and peer-related social influence, could further improve outcomes. Recommendations included stricter collateral policies, formal communication in collections, and community support programs to bolster repayment consistency.