The need for credit is due to the fact that some households and enterprises have temporarily free cash, while others need them. In a market economy, the main suppliers of cash are households (the private sector), and consumers are businesses. Their interaction is carried out through intermediaries: commercial banks, investment companies, insurance companies, brokerage offices, etc. It is they who accumulate free financial resources and place them among consumers of loan capital. The system of economic relations arising in the process of providing monetary or material resources for temporary use on the terms of repayment and, as a rule, payment, is called a loan. A legal (individual) person providing a loan is called a lender, and the one who takes it is called a borrower.
A bank loan performs the following main functions: redistributive (through a loan, monetary and material resources are redistributed on the terms of subsequent repayment between enterprises, industries, regions of the country); cash substitution with credit money and operations (non-cash payment). These functions determine the role of credit in the process of reproduction. It accelerates the development of production, increases its efficiency, ensures continuity.
In a market economy, credit resources are directed primarily to the most profitable, fast-growing sectors of the economy, used to expand production, introduce new equipment, and advanced technologies. The loan allows you to accelerate the turnover of funds of enterprises, is the most important source of formation of their fixed and working capital. Replacement of cash with credit reduces the cost of organizing money circulation in the country, accelerates the turnover of funds, simplifies settlements between economic entities.
The development of credit relations has led to the emergence of various forms and types of credit. They can be classified according to a number of characteristics. Depending on the terms for which the loan is granted, an oncolle is distinguished (issued for a short period and repaid at the first request of the creditor); short – (up to one year), medium – (from one year to five years) and long-term (over five years) loans. According to the composition of lenders and borrowers, the following main forms of credit are distinguished: banking, commercial, state, consumer, international, leasing loan.
Bank credit is provided mainly by commercial banks in the form of cash loans to entrepreneurs and the population. Depending on the collateral, a distinction is made between guaranteed (secured) and unguaranteed (unsecured) loans. A secured loan is a loan issued on bail. The latter can be securities, real estate and other inventory. A loan issued on the security of real estate was called a mortgage. An unsecured loan is a loan issued without collateral.
According to the terms of repayment of loans, there are term, deferred and overdue. Term loans are loans that have matured, deferred loans are loans that are repaid by the bank for a later period (extended loans). Overdue loans are loans that are not repaid within the prescribed period. By the nature of repayment, loans are distinguished, repaid in a lump sum and in installments.
A commercial loan is a loan provided by economic entities to each other in commodity form by deferring payment. The need for it arises due to the discrepancy between the time of production and circulation of individual goods.
A state loan takes place when the borrower is the state, and the creditors are banks, the population, and enterprises. To borrow the necessary funds, the state issues and sells securities: treasury bills, bonds. Buying them, business entities, the population are credited by the state.
Consumer credit is mainly associated with the provision of loans to the population for the purchase of durable goods. Such loans are repaid in installments, in parts. The consumer loan also includes the credit of pawnshops. It is issued on the security of movable property, including precious stones and metals, for a period of up to three months, in the amount of 50 to 80% of the value of the pledged property. If the loan is not repaid on time, the things handed over to the pawnshop are sold, and the proceeds go to cover the debt.
A leasing loan is the long-term lease of machinery and equipment, vehicles, etc. while retaining ownership of them for the landlord. It is divided into financial and operational. With a financial loan, technical means are provided for the entire period of their depreciation, with an operational one, the term of the agreement is shorter than the service life of the means of production.
An international loan is a loan issued by states, international credit and financial institutions, private firms in the process of international economic cooperation. It has mainly a monetary form, although it can also be provided in a commodity form. Loans issued in cash form and having a long-term nature are called external loans. International commercial credit often acts as a brand loan, when the exporting firm of one country grants the importer of another country a deferral of payment.