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What is a loan? | Definition Familiarize Yourself with the Concept of Credit

THE CONCEPT OF THE CREDIT

THE CONCEPT OF THE CREDIT

Taking a loan is the conclusion of a contract. One party to the contract is the bank, the other is the borrower. When entering into a loan agreement on the bank’s side, there is an obligation to transfer a specified amount of cash to the borrower. This appropriation is intended for a fixed purpose which is set out in the loan agreement. By contrast, the borrower, through a loan agreement, undertakes to use the amount of cash provided by the bank in accordance with the contract. Moreover, the borrower undertakes to repay the loaned amount together with interest due and cover the cost of the loan. Repayment terms are specified in the schedule of repayment of the loan, which is part of the contract. Repayment of individual installments, the borrower undertakes to repay in accordance with the contract, on certain dates.

LOAN FOR EVERYONE

LOAN FOR EVERYONE

Colloquially speaking through a loan, we buy money for money from the bank. This means that the bank credits us with a certain amount of money, and we, under the terms of the loan agreement, will have to give back this amount and the amount of interest and credit costs. This means that we will have to give back a larger amount than we borrowed. If we take a loan of € 2 thousand from the bank euro means that we will have to return to the bank not only this amount. We have borrowed 2,000 to give back euro, the amount of interest on the loan and the cost of the loan. The cost of loan insurance is often added to the total loan amount. Credit insurance is proposed with every loan agreement. Especially at low amounts, we can opt out of it, which we often are not aware of.

BANK CREDIT CHARGES

BANK CREDIT CHARGES

The loan agreement is concluded in writing. Thanks to this, it sets out in detail the terms of the loan, which must be consistent with the concluded agreement throughout the loan period. The loan agreement is considered to be compact when it is signed by the parties. A loan is an obligation for both parties to the contract. Contrary to appearances, not only we have a commitment to the bank but also a bank towards us. First and foremost, the Bank, in accordance with the contract, is obliged to provide the borrower with a specified sum of cash. the borrower signing the loan agreement undertakes, on the other hand, to repay the amount of the installments along with interest and credit costs on time. In a situation where the loan is insured, the borrower also undertakes to cover the costs of loan insurance. In the event of untimely repayment of the amount due, the bank, according to the contract, has the right to charge interest on late repayment. It is important, therefore, to pay off individual installments on time. Timely repayment may decide to receive more loans. The bank loan is also characterized by the fact that the amount of funds from the loan is to be used for a specific purpose, in accordance with the loan agreement. For example, if we take a loan for an apartment, we must buy a flat for the money from the loan, not a car, for example. The borrower must therefore use the loan money in accordance with their purpose, as provided for in the loan agreement.

Taking a loan, it must be remembered that it is a contract containing a bilateral obligation. The bank gives us a certain amount of money at our disposal, we commit ourselves to timely repayment of the loan installments together with interest due and all other loan costs. The most important thing so we must know when reaching for a loan is the fact that we always have to give back more than we borrowed.

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