We explain what a bank loan is and where the borrowed money comes from. In addition, the importance of this instrument in the economy.
Bank loans have a high impact on the economy of the countries.What is bank credit?
A loan is a financial operation where one entity grants another an amount of money in an account at its disposal, the second committing to return all the money taken, also paying a interest for the use of that amount.
Bank loans are granted by institutions credit, typically banks, by holding a contract for which the debt is born.
The concept of credit is often confused with that of a loan, the difference is that in credit the client He has money at his disposal and only pays interest for the amount he uses, while in the loan, the client receives all the money and pays interest for the entire amount, regardless of how much he actually spends.
The origin of the loan money is in the deposits that others make in the same bank, to which the bank pays interest: it is in that difference between the rates offered for deposits and the rates charged for loans where it is much of the banking business.
As is known, banks represent a space of decision making fundamental in all the countries of the world, and with the passage of time its operation has become more complex. At present, except in economies individuals where access to credit is very easy, the granting of a loan is a vote of confidence by the banking system to an individual or business.
In the case of individuals, one of the most frequent loans is called mortgage (for the purchase or construction of houses), or those destined to the acquisition of vehicles or other property of utility for the persons, either for work or for other purposes.
Credits for companies
In the case of organizations (Business, industries, etc.), bank loans logically represent much larger amounts of money, which are used to capitalize the organization: it is expected that with this they can buy machines, hire employees or develop a new product that allows them to obtain a gain, even discounting the loan repayment and interest.
In both cases, the potential debtor must demonstrate solvency, offering guarantees or providing receipts and proof of their equity and income statement: that is why in the case of companies, many times receiving a loan can mean future growth, in this way They make them attractive in other ways, for example, their share price may go up.
Importance of bank credit for the economy
Bank credit is one of the market variables that has a great impact on the economy of the countries. In general, the Central Bank of a country and the so-called state banks set the levels of interest rates to which private lenders have to adapt (in cases where it is not directly regulated).
A strong restriction on access to credit, that is, a very high interest rate, which will imply a lot of economic effort for its repayment, will surely result in the contraction of sectors such as construction or the automotive or machinery industry, and with it, unemployment is likely to rise.
However, access to unlimited credit has its risks, since there are many precedents of countries where after a weather it became impossible for many creditors to get their money back, generating a sudden outbreak of mistrust and with it, a resounding fall in the investment from one moment to another.
All in all, bank loans are still a fundamental instrument for capitalization, both for individuals and for companies. Big ventures Throughout history they would not have been possible without the kickoff given by one of these financial instruments.
Credit cooperatives aim to bring these injections of money closer to sectors with less possibilities of accessing bank credit, given the rigorous formal requirements that banking institutions usually have. For certain individuals or small and medium-sized companies, this may be the only viable financing alternative.