Credit is today a term that we know well. Consumer credit, for example, allows us to resolve cash flow problems and provides us with many services on a daily basis. In this article, we take stock of its origins and explain how it works.
Credit today
Nowadays, we often hear about credit institutions. Here, credit is like a loan that these financial institutions grant you . Depending on its use, it has different names and comes in various forms.
Consumer credit known as easy credit is aimed at everyone, unlike credits whose conditions are very demanding. You can use it as you wish without the bank bombarding you with questions. You have to pay monthly payments, which is a fixed amount every month until you have repaid everything plus interest.
Home credit is used to buy a house or carry out renovation work with a view to renting it or selling it for a higher price. The conditions for obtaining it are often strict. Auto credit, for its part, allows you to buy a car. In both types of credit , cash or liquid assets are often not delivered to the borrower. It is more of a financing promise from the bank which will only be executed once the transaction is confirmed.
The meanings of credit through the ages
The word credit comes to us from creditum in Latin and credo. These two terms both relate to belief: believing in the solvency of the debtor. In business, credit already existed in the past. Among other things, it allowed cashiers to take an amount from the cash register without exceeding a certain threshold in order to be able to pay for their needs in cash.
Besides, the bank attributes another meaning to the word credit. This is the part of a checking account where you deposit money . This is then called a credit transaction unlike debit, a term which indicates that money is withdrawn from the account. As long as the amounts paid exceed the total withdrawn, the account is said to be in credit. Otherwise, he will be in debt and overdrawn.
What happens when you can’t repay?
We talked about solvency above. The banks, by investigating and asking you tons of questions, want to ensure that you can repay your loan and its remuneration on time. If it happens that you are unable to repay your debt in full, the bank will issue its guarantee card.
For a mortgage for example, the institution will take away the property in question and what is inside in the event of default. When signing the credit or loan contract, a personal contribution (money from your savings, land, a house or valuable property) will allow the bank to still be paid even if you fail to pay in cash on the due date. In this case it is always more prudent to simulate your credit to assess how much you can borrow and repay from this to that date.
