1. Types of bank credit! Akramova D

2. Bank Credit: The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. Before we get into the specific categories of credits/loans that banks offer, let's look at two of the major characteristics that vary among bank loans: 1. The term of the Loan: The "term" of the loan refers to the length of time you have to repay the debt. Debt financing can be either long-term or short-term 2. Security or Collateral required for a loan: Debt financing can also be secured or unsecured. Bank Credit: The borrowing capacity provided to an individual by the banking system, in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. Before we get into the specific categories of credits/loans that banks offer, let's look at two of the major characteristics that vary among bank loans: 1. The term of the Loan: The "term" of the loan refers to the length of time you have to repay the debt. Debt financing can be either long-term or short-term 2. Security or Collateral required for a loan: Debt financing can also be secured or unsecured.

3. Specific types of bank credits/loans: * Working capital lines of credit: for the ongoing cash needs of the business * credit cards: higher-interest, unsecured revolving credit * short-term commercial loans: for one to three years * longer-term commercial loans: generally secured by real estate or other major assets * equipment leasing: for assets you don't want to buy outright * letters of credit: for businesses engaged in international trade Specific types of bank credits/loans: * Working capital lines of credit: for the ongoing cash needs of the business * credit cards: higher-interest, unsecured revolving credit * short-term commercial loans: for one to three years * longer-term commercial loans: generally secured by real estate or other major assets * equipment leasing: for assets you don't want to buy outright * letters of credit: for businesses engaged in international trade

4. The cost of credit is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes interest, arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Other costs, such as those for credit insurance, may be optional. The borrower chooses whether or not they are included as part of the agreement. The cost of credit is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes interest, arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Other costs, such as those for credit insurance, may be optional. The borrower chooses whether or not they are included as part of the agreement.interestcredit insuranceinterestcredit insurance

5. Interest and other charges are presented in a variety of different ways, but under many legislative regimes lenders are required to quote all mandatory charges in the form of an annual percentage rate (APR). The goal of the APR calculation is to promote ‘truth in lending’, to give potential borrowers a clear measure of the true cost of borrowing and to allow a comparison to be made between competing products. The APR is derived from the pattern of advances and repayments made during the agreement. Optional charges are not included in the APR calculation. So if there is a tick box on an application form asking if the consumer would like to take out payment insurance, then insurance costs will not be included in the APR calculation (Finlay 2009). Interest and other charges are presented in a variety of different ways, but under many legislative regimes lenders are required to quote all mandatory charges in the form of an annual percentage rate (APR). The goal of the APR calculation is to promote ‘truth in lending’, to give potential borrowers a clear measure of the true cost of borrowing and to allow a comparison to be made between competing products. The APR is derived from the pattern of advances and repayments made during the agreement. Optional charges are not included in the APR calculation. So if there is a tick box on an application form asking if the consumer would like to take out payment insurance, then insurance costs will not be included in the APR calculation (Finlay 2009).annual percentage rateannual percentage rate

6. Commercial banks are for-profit institutions that provide lending products to businesses and consumers. Account options vary between banks, but commercial bank credit products typically include fixed rate and variable rate loans. Additionally, many banks offer both term loans and open- ended credit products. Commercial banks are for-profit institutions that provide lending products to businesses and consumers. Account options vary between banks, but commercial bank credit products typically include fixed rate and variable rate loans. Additionally, many banks offer both term loans and open- ended credit products.commercial bankcommercial bank

7. Long-term fixed-rate loans provide banks with a steady and predictable income source. Many types of mortgages and vehicle loans have fixed rates of interest which means that the borrower’s monthly loan payments remain unchanged throughout the loan term. Fixed-rate loans for homes often have terms that last between five and 30 years. Loan terms for vehicles are typically capped at between five and 10 years to ensure that the loan term does not exceed the vehicle's useful life. Long-term fixed-rate loans provide banks with a steady and predictable income source. Many types of mortgages and vehicle loans have fixed rates of interest which means that the borrower’s monthly loan payments remain unchanged throughout the loan term. Fixed-rate loans for homes often have terms that last between five and 30 years. Loan terms for vehicles are typically capped at between five and 10 years to ensure that the loan term does not exceed the vehicle's useful life.

8. Variable-rate loans are commercial bank credit products that normally track the movements of an index such as the United States prime rate or the London Interbank Offered Rate (LIBOR). The interest rates on variable products normally reset on a monthly or annual basis. Generally, banks set the client's rate by fixing the loan at a certain margin above the index. If the index rate increases by a single percentage point then the interest rate on the loan increases by the same margin. Variable-rate loans are commercial bank credit products that normally track the movements of an index such as the United States prime rate or the London Interbank Offered Rate (LIBOR). The interest rates on variable products normally reset on a monthly or annual basis. Generally, banks set the client's rate by fixing the loan at a certain margin above the index. If the index rate increases by a single percentage point then the interest rate on the loan increases by the same margin.prime rateprime rate

9. Some fixed term loans including mortgages have variable interest rates. In many instances, these commercial bank credit products begin with an initial interest only term that may last for up to 10 years. At the end of this term, the bank calculates the outstanding principal and interest balance. The loan converts to a fixed-rate product for the remainder of the term and monthly payments are structured so that the entire balance is paid off by the end of the loan term. In other instances, borrowers pay variable interest rates for the entire loan term and then make a single balloon payment to pay off the principal when the loan term ends. Some fixed term loans including mortgages have variable interest rates. In many instances, these commercial bank credit products begin with an initial interest only term that may last for up to 10 years. At the end of this term, the bank calculates the outstanding principal and interest balance. The loan converts to a fixed-rate product for the remainder of the term and monthly payments are structured so that the entire balance is paid off by the end of the loan term. In other instances, borrowers pay variable interest rates for the entire loan term and then make a single balloon payment to pay off the principal when the loan term ends.

10. Commercial bank credit cards are unsecured loan products that normally have open-ended terms. Clients are given access to a revolving line of credit which they can draw from at any time. Borrowers only make payments based upon the outstanding balance on the credit card. Cardholders can pay down the outstanding balance and then reuse the credit line again at a future date. Some banks assess monthly and annual card fees while other banks simply generate revenue by charging interest on credit cards. Commercial bank credit cards are unsecured loan products that normally have open-ended terms. Clients are given access to a revolving line of credit which they can draw from at any time. Borrowers only make payments based upon the outstanding balance on the credit card. Cardholders can pay down the outstanding balance and then reuse the credit line again at a future date. Some banks assess monthly and annual card fees while other banks simply generate revenue by charging interest on credit cards.credit cardcredit linecredit cardcredit line

11. There are many commercial bank credit options available to both small and large businesses. These include business credit cards, unsecured equity lines and commercial term loans. In some countries, the national government guarantee some business loans so as to encourage banks to lend to start-up businesses particularly those in industries where large numbers of businesses fail within the first few years of operation. Likewise, some commercial bank credit options for consumers such as mortgages are sometimes government insured which means lenders assume a lower level of risk when issuing these loans. There are many commercial bank credit options available to both small and large businesses. These include business credit cards, unsecured equity lines and commercial term loans. In some countries, the national government guarantee some business loans so as to encourage banks to lend to start-up businesses particularly those in industries where large numbers of businesses fail within the first few years of operation. Likewise, some commercial bank credit options for consumers such as mortgages are sometimes government insured which means lenders assume a lower level of risk when issuing these loans.business creditbusiness loansbusiness creditbusiness loans

12. Consumer debt can be defined as ‘money, goods or services provided to an individual in lieu of payment.’ Common forms of consumer credit include credit cards, store cards, motor (auto) finance, personal loans (installment loans), consumer lines of credit, retail loans (retail installment loans) and mortgages. This is a broad definition of consumer credit and corresponds with the Bank of England's definition of "Lending to individuals". Given the size and nature of the mortgage market, many observers classify mortgage lending as a separate category of personal borrowing, and consequently residential mortgages are excluded from some definitions of consumer credit - such as the one adopted by the Federal Reserve in the US. Consumer debt can be defined as ‘money, goods or services provided to an individual in lieu of payment.’ Common forms of consumer credit include credit cards, store cards, motor (auto) finance, personal loans (installment loans), consumer lines of credit, retail loans (retail installment loans) and mortgages. This is a broad definition of consumer credit and corresponds with the Bank of England's definition of "Lending to individuals". Given the size and nature of the mortgage market, many observers classify mortgage lending as a separate category of personal borrowing, and consequently residential mortgages are excluded from some definitions of consumer credit - such as the one adopted by the Federal Reserve in the US.credit cardsinstallment loansconsumer lines of creditmortgagescredit cardsinstallment loansconsumer lines of creditmortgages