It’s interesting to notice that many in our modern terms involving money have origins within the Greek or Latin languages.
The term ‘Credit’ is obtained from the Latin ‘Credo’ which roughly means “In My Opinion”, an appropriate intending to reinforce a convention of trust which involves financial transactions. Dads and moms of yore, lending and borrowing were purely made by guarantee with the spoken word as opposed to the written word. Credit in days of old didn’t always involve money and also the term was utilized to explain barter exchanges of products or services.
However, in modern economy, the word credit denotes a transaction involving money. Nowadays lengthy attracted contracts and contracts, many of them worded with legal terms which are past the idea of ordinary people, match the obligations of lending and receiving.
Credit means deferred payment or payment later on for receipt of cash, services or goods. The deferred payment (overtime) is what is known “debt”. Credit is offered with a creditor or loan provider to some debtor or even the customer.
A particular amount of cash provided to a person for education, family, household, personal and vehicle purposes known as a ‘loan’, also known as credit, consumer lending or retail lending.
Some broad categorizations of consumer loans
Consumer loans are characterised by differing types – convertible loans, quick installment loans, single loans, guaranteed and short term loans, fixed-rate and variable-rate loans etc.
• Single loans – also known as interim or bridge loans because the term suggests, they’re for brief-term finance requirement. Single loans need to be paid back in the finish from the loan term inside a lump sum payment including rates of interest.
• Installment loan or EMIs – are compensated at regular times, usually monthly. Home and vehicle loans belong to this category. The more the repayment term, more the money flow as rate of interest calculations vary.
• Guaranteed loans – within this category, you “secure” a good thing, a house, vehicle or any collateral you can use to recuperate payment if you can’t result in the guaranteed payments. Guaranteed loans also affect home and vehicle loans and because they are supported by significant collateral, interest fees on such loans are lower.
• Short term loans – are individuals that don’t require collateral in most cases given simply to borrowers with excellent credit scores and histories, more frequently companies or high internet worth individuals and rates of interest are compounded.
• Fixed interest rate loans – an excellent number of consumer loans fit this bracket. Exactly the same rate of interest applies throughout the borrowed funds term but in comparison with variable rate loans, fixed interest rate loans get more interest as there’s the probability of the loan provider making losses when the market fluctuates.
• Variable-rate loans – upfront these financing options possess a lower rate of interest and there’s the clause of adjustable rates of interest relevant at periodic times from the loan-term. The interest rate is dependant on a catalog controlled by market trends as well as an interest-rate spread calculated monthly, six-monthly or yearly.
• Convertible loans – are the ones in which the interest structure can differ from the fixed to variable interest rate or vice-versa in a pre-determined time throughout the loan-term.