Many people faced monetary difficulties. There are several ways to solve this problem. For example, you can ask for a loan from your friends or relatives. But can they find the right amount for you? And how will you now look in their eyes? Alternatively, you can find a quick part-time job. But the work is "distributed" far from every step, and how heavy will it be? After all, no one will offer good earnings for the minimum time. In such cases, a panacea is a bank loan. But is everything as simple as it seems at first glance?
It is profitable for banks to give loans to everyone
This is a fallacy for every borrower who is going to take a loan. There are certain lending principles on which this process is based. Only strictly observing them, the banking institution will be able to profit from the issuance of loans. Exceptions are only microcredit companies, but they will be discussed a bit later.
In an attempt to understand the principles of bank lending, many future borrowers are often confused, because in many sources information is provided using specific terminology. But in fact, everything is much simpler than you think.
Basic principles of lending
The first and main principle that the borrower has to deal with is repayment. In simple terms, the need to repay the debt in full. Of course, not a single lender will provide a penny if it is initially known that the money will not be returned. This is just as unnatural as lending to a friend, knowing that he certainly will not return the money, otherwise it is simply called a gift. Although Russian history is familiar with cases in which the principles of bank lending receded into the background.
Non-repayable loan
The so-called non-repayable loan was popular in the agricultural sector and was aimed at removing the borrower from a crisis situation. The catastrophic financial situation of the borrower suggested that the debt would not be repaid or not repaid in full.
This type of financial assistance is not much like classic lending. It assumes, rather, budgetary assistance and is carried out through state points of issue of loans. In other cases, such lending principles as repayment are the main condition for obtaining a loan.
Refundability
As the bank understands, will the borrower be able to repay the loan, and will he have enough funds for this? When concluding the contract, the responsible employee carefully checks all the data of the future debtor. The borrower collects a package of documents, which may contain a statement of income, and documents on property owned, depending on the requirements of a particular bank. For an individual, a guarantee of constant solvency can be wages, interest on deposits, a loan at another bank or, for example, social payments. Legal entities, in turn, regularly receive revenue or profit.
After analyzing all these data, the bank employee, along with the security service, decides whether it is possible to give a loan to this client, and the principles of lending are carefully followed in this case. But the bank itself has the ability to influence the provision of repayment. He sets interest rates and conditions of "financial assistance" so that they are affordable for the average borrower.
I return the loan when I want
With serious banks, such a scheme will not work in any case. The principle of urgency simply impedes this. This means that the loan must be repaid exactly at the time specified in the contract. We are talking not only about the boundary date for the full repayment of the loan amount and interest, but also about the billing period of each month. When drawing up the contract, you are informed what date of each month and what is the minimum payment you need to make to the account for repayment. A delay of even one day can result in a heavy fine to the payer.
However, some lenders provide their borrowers with a certain loyalty system. For example, they forgive the amount of the first fine if the obligatory payment was nevertheless made in the near future (indicated by the bank employee). For the convenience of making payments, many banks offer their customers to issue a card with a billing date. The borrower simply replenishes his card with a certain amount, and on the day of the obligatory payment, the required amount is simply automatically debited from the account. This simplifies the repayment system and eliminates the cases when the client simply forgot about his settlement date. Ignoring such principles of lending as urgency, you can get into the database of troubled debtors of the bank, as a result of which the next time you can safely refuse to grant a loan, even if the previous one was paid in full.
Payer Requirements
First of all, banks are engaged in lending for the sake of profit, rather than helping everyone in need, so you need to be prepared that you will have to pay in full for the loan service. This conditions such a principle of lending as payment. Paid means that the borrower is forced not only to repay the loan body on time, but also to pay a percentage for using the bank’s money, as well as all accrued fines and expenses for the period of use. According to the same principle, a banking institution accepts money for a deposit. On contractual terms, the depositor deposits a certain amount into the account and receives interest from the bank using its personal funds. Similarly, the borrower pays for the use of the bank’s money. As a result, both parties are interested in a deal.
The essence and principles of lending
There are also other factors that influence whether a person wants to get a loan. For example, if we are talking about a sufficiently large amount, then in most cases the presence of guarantors, collateral, or other guarantees will be required. The lender must be sure not only that various types of payments are regularly credited to the debtor's account, but also that the payer is well-equipped to recover the amount of debt even if the cash proceeds suddenly stop.
For example, a loan was issued to a working person with a good salary. But due to certain circumstances, he lost his job and cannot find a new one. What then to do with the repayment of the loan? But it often happens that the borrower simply refuses to pay and thinks that he will get away with it. The Bank cannot take such risks and distribute funds to everyone. The presence of guarantors or property is an additional guarantee of full repayment. This is the principle of security.
Loan without security principle
Since there is no criminal liability for non-payment of a loan (only if it is a matter of extra-large amounts), a malicious deadbeat can only be brought to administrative responsibility, and therefore forced to repay the debt by force through the court and executive service. This means that the current accounts of the borrower will be blocked, and an amount equal to the amount of debt will be debited from them. If there are none, then about 20% of the income is withheld, in some cases - 50%. If the borrower does not have official income and accounts with funds, property will fall under the gun. He is allowed to bid at the lowest price and is covered by the amount of debt. But if the borrower is “poor, like a church mouse,” then there’s nothing to take from him, he’s bankrupt. The security principle negates such cases.
The target nature is also important. The lender has the full right to find out about the goals and needs for which a loan is taken before issuing the required amount.
Which companies are sacrificing principles?
There are a number of microcredit offices. It can be small organizations or even online loans. In most cases, a person in need of financial assistance simply fills out a short questionnaire, which indicates passport data, registration, phone number and other information necessary for the preparation of the application. The approval process is quite fast, the principles of lending fade into the background. However, there are pitfalls. Large amounts from such companies should not be expected, especially if a loan is taken for the first time. The interest on such loans far exceeds the average market, and the terms are incredibly short. The overdue fines are enormous, and they will grow every day. This is the urgency fee.
Now you know what the principles of lending are. It is worth thinking carefully before becoming a borrower, carefully studying the contract and choosing a worthy company that has a good reputation in the lending market.