The loan comes from the Latin «kreditum» (loan, debt). In the common sense, a loan is a transaction between two entities about a loan or a loan. In this transaction, one party (bank) is the lender or lender, and the other (client) is the borrower or borrower.
Moreover, the loan transaction is characterized by two indisputable qualities. Firstly, the interests of both parties must coincide; secondly, we need material guarantees for the parties to fulfill their obligations. Simply put, a loan transaction can only be realized when the terms of the loan are satisfied by both parties, and at the same time they have every reason to trust each other. More info at http://usapaydayloans.info/nevada/.
From the point of view of the bank, a loan is always provided to the borrower subject to compliance with — payment, repayment, urgency and security of borrowed funds. These conditions disclose the most important features of a credit relationship.
To make it clear what is at stake, we will decipher each condition for providing a loan.
— Paid — this is a kind of “price” of the loan, which in practice is realized through the mechanism of bank interest. The paid condition means that the funds provided in the form of a loan, having returned to the bank after some time, should not lose their purchasing power.
But it’s no secret that in order to give a loan to Ivanov, the Bank uses funds from deposits of other customers (for which, in turn, the bank itself needs to pay interest), or loans from other banks (for which you also have to pay), plus the Bank has their own costs (from taxes to the maintenance of offices and salaries to employees).
Finally, in any transaction of the Bank there should be a profit that it should pay to its shareholders. All this is reflected in the interest rate, as a result — the interest rate on the loan can be about 30% per annum, of which the Bank’s net income will be only 3-5%.
— Repayment is also an integral part of the loan, its attribute. Without repayment, the loan will lose all meaning. Here is an urgent example — if one borrower does not repay loans, the bank cannot return deposits to others and pay interest on them. Capital turnover is disrupted, the chain is broken — as you can see, violation of this credit condition is the basis of the modern financial crisis.
— The condition of urgency implies that the loan should not only be repaid, but repaid within the specified period established by the loan agreement. The loan term is the time limit for finding a loan from the borrower and acts as the measure beyond which quantitative changes in time turn into qualitative ones.
That is, if the period of use of the loan is violated, then the value of the first and second conditions of the loan is lost. For too long, the loan loses its true purpose — it actually becomes a GIFT.
-Credit security is a way by which a bank minimizes the risk of loan non-repayment. The bank usually does this in such a way — it evaluates the value of the money provided in the form of a loan, the amount of its income and takes collateral for this amount. It can be securities, precious metals, real estate, cars, other types of collateral.
The main thing is that when selling this property, the Bank will be able to quickly receive its money plus income. A guarantee for a loan can also be a guarantee (of individuals or legal entities), which implies that in case of a delay in payment by the borrower himself, loan payments will be paid by the guarantors in full and on time.