What does loan mean discussing what is it + 9 facts about it + the history + why do people need it + taking a loan using a bank card + 5 useful tips?
What does loan mean and why people take it?
What kinds of loans are there and what are the dangers of taking them?
Let’s try to answer to all these questions on our article “What does loan mean?”
What does loan mean?
The loan is the form of transaction of the money which is borrowed.
It means that the money or the goods are given at interest for a certain period.
The loans may be long-termed, middle-termed, and short-termed.
In addition, there exist the following kinds of loans:
9 interesting facts you should know about loans
The main sign of a loan is the targeted form of lending activities.
The creditor may be both the legal entity who sells the goods and services and the credit unit.
The bank loan is mostly given in the form of money to buy real estate or to pay for the treatment.
The commodity form is given to sell the goods on the deferred basis at the retail price.
- The principles of the loan are the collectability, the urgent lending, the security, and the targeted character.
The short-termed loans mean that they are given maximum for one year and are mostly intended to form the gross revenue.
The long-termed ones are given for more than a year and are used for various investments.
The size of the bank loans can be small, middle and big.
The first type is given to the population, while the rest are mostly used by the middle business and the huge auction communities.
The ways how to pay back the credit can be either non-recurrent or by installments – it means that the payment is either monthly or quarterly.
The loan which is given in cash is repaid non-recurrently: the percent and the sum are returned in the moment the term of agreement came to its end.
- The percentage rate of the bank loan can be fixed or variable.
The distinguishing feature is that the deal does not require the participation of the financial mediators and is simply made by the two parties.
For example, between the bank and the private individual.
Speaking about the private loans between the acquaintances with trustworthy relations, the deals may be free.
It means there is no interest for using the definite sum of money within the term of using it.
The loan in the ancient times
Discussing such theme as borrowing money at interest, the similar obligational relations have existed for ages.
Gradually as the society developed, there appeared plenty of moral and social aspects which are peculiar for different creatures.
They mostly mean the patriotism, the non-repayable help to the close people, some moral obligations, and others.
The development of the commodity-money relations brought the well-off people who could give another person the material valuables on the condition of the obligatory return in the bigger size which usually depended on the time of using the loan.
Such people were called the money lenders and, surely, they profited from it – the thing is in the interest or the mortgage which was given to get the loan.
Very often the money lenders saw the hopeless situation and deliberately offered the unbeneficial deal to the borrower and because of it the society mostly treated money lenders negatively.
How to Borrow Money?
Getting a loan in a bank
Much later the first banks appeared and they offered the deals with clear and strict rules which were controlled by the government. In addition, there was a possibility to gradually increase the investment or make other bank transactions.
Nowadays, almost all developed countries have the banks which offer different credit services and it has become an ordinary thing: regardless of the high interest, people use them because of their convenience of getting cash momentarily.
Moreover, the organizations which give the loans at once have become very popular lately.
Why do people need loans?
People get a loan when they urgently need cash.
Usually, such organizations do not give them at once but within several hours or days.
Most of them do not even demand the certificate of income and other documents.
However, the suchlike conveniences and speed make people pay high interest and in the strict terms.
In addition, such microcredit organizations are tight to many huge scandals because the conditions differ a lot from the bank terms and they are the worst for the clients.
Still, why do people use these services?
The thing is that the percentage of the approved applications is extremely high.
The big financial institutions have the database of the debtors and simply people who had ever taken a loan and depending on that information they come to the conclusion whether to interact with the person or not.
To put it simply, the unemployed person who already has the loan which has not been repaid yet will be probably denied in another credit.
However, the organizations which give the microcredits will approve of the application and sign the deal.
Surely, they do not work for the bad and when the loan is not repaid, they simply sell it to the debt collection agencies.
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Taking a loan on a bank card
The development of the Internet and the digital technologies led to the establishments which have appeared not long ago and offer the urgent loan on the bank card.
In order to make it convenient, all operations are made on the net by filing the electronic applications on the official websites of those organizations.
There everyone can learn in detail all conditions of how to get the loan, the percentage rate, the terms of paying back, the fines in case you expire the date and so on.
They differ by the terms of reviewing and the list of required documents.
Usually, in order to receive the money, a person must provide the organization with his data from the passport, scans of some documents and contact information.
In case the application is approved, the managers contact the client to clarify all details and transfer money to his account.
Filing the application, a person must be very attentive and study all documents and conditions to avoid future problems.
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The useful tips on how to get the loan
5 recommendations of taking a loan:
Take it only in case of emergency
The sky-high interest is the main reason why you must think several times before signing the deal.
Choose the reliable crediting company
The attractive percentage rate is not the reason to agree to cooperate with the crediting company.
If the conditions of one company differ a lot from the rest offers on the market, it must raise some suspicions in you.
Think how to repay the loan beforehand
If you decide to take a loan, you must follow all the terms of the contract.
Before you sign it, you’d better think how you are going to return the money and the interest.
If you are not sure you can do it, you’d better refuse the cooperation.
Otherwise, you risk changing your financial condition for the worse.
Attentively read all terms of the agreement
Pay special attention to those terms which are printed in the small font.
Everything that is mentioned in this document has legal power.
Besides, pay attention to those paragraphs that describe the mechanism of assigning fines in case you fail to pay in time.
Ask the managers of the company what sanctions can be applied to you in case you fail to stick to the agreement.
Count how many expenditures you need to cover the loan
Using a simple calculator count how much it will cost you to use the services of such companies.
What does loan mean?
If you are eager to take a loan, you should not agree to the attractive offers of the unknown companies who can offer you a big sum of money with a small interest.
Remember that the more you take the more you’ll have to return and take only the sum you really need.
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