LOANS

Loans Loans is an arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point in time...

Loans Activities of the Bank which covers 70% of the revenue in developed countries, or up to 90% of the revenue of the Bank, in the developing countries.

Currently 80% of the revenue of many commercial banks is from credit operations, which lending plays an crucial role.

Loans
In addition, thanks to its lending activity, many economic investors can borrow the loan to invest in production and business activities. The profits which they make not only help them to pay back the loan but also have deposits in the Bank. By doing that, the transactions in the bank are increasing. On the other hand, once business activities develop, the societal quality also develops, which leads to the development of the Bank.

Types of Loans
A Secured Loan : Is a loan that in addition to borrow, the bank also hold the assets of the borrower for the purpose of handling the property to recover the loan when the borrower breach of credit contract. Because the bank doesn't directly manage the borrower's funds, there are a lot of risks so that the bank usually require the borrower have property security for the loan.

Types of Loans Unsecured Loan :

Is a loan that the bank doesn't hold the assets of the borrower but the bank make some conditions in credit contract : the borrower mustn't transaction with other banks, the borrower's business operations must be managed by the bank.

Normally, only the prestigious clients and customers had contribution some capital in the bank can be have unsecured loans.

Types of Loans
Direct Loan
Is a loan when the customer apply for a loan, the bank will transfer money to borrower on the basis of the conditions in contract. When the customer have collateral, don't need to any intermediary, they often use direct loan contract

Types of Loans
Indirect Loan
Is a loan that bank lending through organizations such as: groups, teams, social organizations, then the borrower to the lending institution to the amount you need for a given interest rate, it will reduce borrowing costs, limit risk to the bank.

Indirect lending is often applied to small loans, short-term, borrowers dispersed... Banks will lend to intermediaries, then the borrower will contact the intermediary to borrow at a reasonable interest rate with a lower interest rate when borrowing directly from banks

Types of Loans
Demand loans
Demand loans are short term loans that are atypical in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime rate.
They can be "called" for repayment by the lending institution at any time. Demand loans may be unsecured or secured.

6 steps of loans: Six steps of loans:

Step 1: Make a loan application. Step 2: Analyze credit. Step 3: Decision credit. Step 4: Disbursement. Step 5: Monitoring credit. Step 6: Liquidation of contracts.

6 steps of loans:
Step 1 : Meetings with customers to identify the character and purpose of loan. Make a reasonable agreement between the customer and bank. Step 2 : Analysis of the client's business and assessment of factors related to lending. (costs, revenue, progress...). Search situations can occur resulting in risk to the bank, predicted the ability to overcome these risks, planned measures to reduce risk and limit losses to the bank.

6 steps of loans:

Step 3: Bank will decide to agree or refuse to customer records make a contract credit: recorded agreement between the borrower and the bank.
Provide customers with a credit limit and interest rate in specified time. detail: name, address, sources of law, amount of money.

6 steps of loans:
Step 4: After the contract credit is singed, the bank will provided money to the customer as agreed. Disbursement principles: associated with currency movements with the movement of goods or services concerned, in order to check the purpose of the loan customer and ensure the ability to collect debts.

But also to create favorable conditions, to avoid causing inconvenience to the customer's business.

6 steps of loans:

Step 5: Control customers in the used of capital and that allows the bank collecting information about customer to take timely measures.

Step 6: Credit relationship ended when the banks recover debits and interest, if the customers want continue, the bank will look to continue lending.

Abuses in lending
Abuses in lending Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the money lender is not authorized, they could be considered a loan shark .

Abuses in lending
Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous "extra charges".

Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

CREDIT

Credit Credit (from Latin credo translate

"I believe" ) is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt ), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (eg granting a loan ), or they may consist of goods or services (eg consumer credit). Credit encompasses any form of deferred payment. Credit is extended by a creditor , also known as a lender , to a debtor , also known as a borrower .

Credit
Credit does not necessarily require money . The credit concept can be applied in barter economies as well, based on the direct exchange of goods and services . However, in modern societies credit is usually denominated by a unit of account . Unlike money, credit itself cannot act as a unit of account.

Types of credit
Types of credit :

Bank credit Trade credit Consumer credit Investment credit International Public credit Real estate

Types of credit

Trade credit
The word credit is used in commercial in the term " trade credit " to refer to the approval for delayed payments for purchased goods. Credit is sometimes not granted to a person who has financial instability or difficulty. Companies frequently offer credit to their customers as part of the terms of a purchase agreement. Organizations that offer credit to their customers frequently employ a credit manager .

Types of credit Consumer credit

Consumer debt can be defined as money, goods or services provided to an individual in lieu of payment. Common forms of consumer credit include credit cards , store cards, motor (auto) finance, personal loans ( installment loans ), consumer lines of credit , retail loans (retail installment loans) and mortgages .

Types of credit

Consumer credit
The cost of credit is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes interest , arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Other costs, such as those for credit insurance , may be optional. The borrower chooses whether or not they are included as part of the agreement.

Credit risk

Credit risk
Credit risk in business is the loss occurred during the implementation of its credit business operations.

Credit risk is the risk of customers not paying their loans to the bank.
Lack capital risk is the risk that happen when the bank doesn't meet the capital for their business activities. Cause of lack capital because banks don't have flexible financing policy, interest rate policy is not appropriate

Credit risk

Interest rate risk:

Interest rate is the cost to the borrower in a period of time. The phenomenon of interest rate increase or decrease can make the risk for the bank's activities.

Credit risk Liquidity risk

Liquidity risk arises when depositors at the same time wishing to withdraw money deposited in the bank at the same time. This risk doesn't only affect the operation of the bank, but also affect the economy.

Other risks For example: technological risk, exchange rate risk, etc.

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