A loan is a financial loan, which in most cases is provided by various banks and financial institutions to their clients in return for interest payments. Banks make more money by paying interest
repayment in installments, as provided to the client, the lending is on mutually advantageous terms. With the help of credit, people with small amounts of money can quickly get bigger money, and financial institutions can get more money through extended repayments than they have previously spent.
What is a loan?
According to the official definition, a loan is a financial transaction whereby the lender either waives the immediate payment for the service or the goods or pays directly to the debtor, who pays the agreed amount or the debt within the term specified in the credit agreement. .
In most cases, only banks provide credit. A general feature of bank credit is that new money is created at the time of the conclusion of the credit agreement, in the form of debt, regulated by the competence of the central bank. The money the debtor receives is not directly from the bank, so the bank only has to pay interest. After the loan is repaid, the money ceases to exist. This can be achieved by the current monetary system by keeping a large part of the economy under constant indebtedness, in addition to steady economic growth.
Financial institutions give credit on a commercial basis
In all cases, the financial institutions give credit on a commercial basis, ie in the form of fees, interest and other charges, which the debtor must repay in installments. A loan can be applied for a variety of purposes, can be applied for in advance, for example to purchase goods, services or real estate, or it can be applied for free use.
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