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Archive for the ‘Business Credit’ Category

Credit system is the flow of money, based on trust, from those who lend to people who borrow, and vice versa. There is an understanding that the money lent will be returned within a certain timeframe. In order to keep the system functioning, the borrower must repay the debt on time. Too many failures can cause fatal damage to the system. Understanding the credit system to help you manage your loan better.

Credit Basis

The flow of money including the complex and multidimensional. Even in the relationship between people who borrow money and those who lend money, which seems simple, though. People who lend money have a method to assess the suitability of the borrowers are creditworthy. Over time, this method should continue to be developed so that more and more sophisticated. He also had a variety of ways to manage different levels of risk, which arise when dealing with a number of borrowers. These methods named flowers and assurance.

Banks and Credit

When disburse loans to customers, the bank should pursue its own existence that money. Able to collect money to shareholders. Or, the largest source of financing, customer deposit liability form. When significant amounts of bad loans (unpaid or delayed repayment), the bank can-can deliver on its own difficulties. Alias ​​crisis.

Managing Risks

Where there are buyers and sellers, there is a transaction. Where no transaction, there is a price. The interest rate is the price of a loan or credit transaction. Borrowers, aka debtor, enjoy the use of instant cash, while the lenders, creditors alias, lost benefits. Given the expense of lenders use the money immediately, in addition to refund the money, there is also compensation they should receive. Price to be paid by the debtor for having enjoyed the use of instant money belongs to creditors. Compensation was named interest. The interest rate is the price of credit. Each price in a market economy is determined by demand and supply. Also the interest rate, determined by demand and supply of credit, in addition to the magnitude of risk and duration of the loan. If necessary, the lender will ask for collateral or security. In its most basic form, the guarantee is an asset that can be taken over ownership by creditors if the debtor fails to fulfill the terms and conditions of the loan. Creditors to require security for several reasons. One of them, may be, the loan period is extended, while lenders are reluctant to be bound in a commitment for that long without security protection. Alternatively, the debtor has less than ideal credit history; guarantee must be provided so that the creditor believes he would not get stuck in bad loans. Debtors with a high personal risk (such as stunt car driver, for example) are usually required to provide collateral when applying for a loan. Wounds caused by accident could also do away with his ability to pay off debt.

Bad news for all those who believed that the crisis would bring a reworking bank where the loan would be the items banks and financial enrichment to become a tool for economic recovery and employment. No: it looks like we’ll have a consumer credit more expensive.

The heads of financial institutions during the III said Specialized Consumer Credit held in Madrid, at the invitation of Undead Editorial and TDXIndigo, predicted that funding, and particularly consumer credit, are to live a rise in costs that affect borrowers.

A prediction based on current trends in banking reorganization, a reworking that seeks to combat the high default rates with a policy that the European Central Bank has been called “responsible lending.”

This line implies higher studies and research and requirements for the granting of credit, and leads to a higher administrative cost, to be paid by customers fastened commissions and interest.

In attempting to banks credit tap open, the Spanish government gives the green light to the controversial intervention of the facilitators of credit, a group of financial advisors who meet all the loan applications rejected by banks to give new procedure (with a different approach) and get to the bank’s review, without thereby ensuring 100% credit approval.

In some cases, complied with, the facilitators can refer the application to be considered within the ICO credit lines.

The controversial figure of the facilitator is to duplicate the functions of existing figures, which share not only the same intentions and methods, but the same profile as other financial intermediaries such as financial intermediaries Scot (Spanish Seniors for Technical Cooperation .)

Scot, as facilitators, a group of mediators who advocate the claims of individuals and SMEs to the bank. And, as facilitators, are composed of retirees with extensive experience in the financial sector.

For companies, as for five days, to double efforts to review loan applications is a good thing, but fear that the processing time to take many companies to close without ever knowing the final verdict on his case .