Creditors a Debtors

For a credit transaction to take two people, on the one hand, it is the debtor who borrows money but the other is the creditor who is ready to lend that money. Creditors are usually the people who have managed to accumulate more money than they need to survive, and they choose to use that money to create a source of passive income rather than spending it on consumer goods. But debtors, in turn, are people who have little money to fulfill their desires, what they want and they choose this credit option rather than earning money and saving.

 

Loan repayment period

Loan repayment period

Any credit transaction enters into a loan repayment period, a repayment type (in one payment or several ) and, of course, a loan interest rate, which is also the main way for creditors to earn money when they deliver these services. If you want to borrow money then you will have to pay an interest rate on this service, which can also be considered as a commission for giving the borrower the opportunity to borrow.

Interest rates on short-term loans are paid in one installment together with repayment of principal and, for example, in the case of quick loans they are usually about 10% per month. But in the case of long-term loans, you have to pay interest every time you make a regular loan payment, usually monthly.

For such long-term loans, the interest rate is set for a year and is called GPL. If there were no interest rates then the credit would be the perfect service, because the debtor could borrow money and then give as much money back and it once was when people lent different goods to each other rather than money, and then returned as much. But nowadays, anyone who lends money wants to earn money, as well as hedge against losses, because not all debtors will be able to give money back and therefore others have to pay a higher interest rate to cover this difference.

 

Since the invention of credit

Since the invention of credit

there has always been some sort of trouble and anxiety between debtors and creditors, because creditors always want higher interest rates, but debtors just want smaller ones and usually complain that they are too big for them. And because there are many more debtors in the world than the creditor, the media often hear these stories about too high a percentage and not what the debtors say, that it is impossible to earn more and more. In a free market, these percentages should stabilize themselves, because people will not take money if it is too expensive and debtors will not borrow if the interest is too low. And in this way, demand and supply align themselves in the middle and the real price is generated, in this case the percentage that is the most optimal in the given economic conditions.

 

Credit is what makes the modern financial system work

Credit is what makes the modern financial system work

Its because a number of long-term and short-term projects would stop without credit , and consumer goods would not be bought so much because people would not have so much money. And while the credit is for living today at the expense of tomorrow, it is a system that people have chosen and looks like loans will never disappear in the near future. Maybe it will fall but will not disappear!

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