What is a credit counter

Credit - what is a credit?

A loan is usually understood to be the loan of money from a lender to a borrower on certain terms.

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Companies or individuals use a loan to lend each other money. The money will be paid back at a later point in time - usually at predetermined conditions.

Who is involved in a loan?

There are usually two parties in a credit relationship.

The creditor is the one who lends the money. It is often a bank.

The debtor is the counterparty, i.e. the one who borrows money. It can be a private person (for example in the case of consumer loans), a company or a bank.

Credit and types of credit

Loans can be divided into different credit cards.

Loan Types by Lender:

  • Bank loan
  • Supplier credit
  • Employer loan
  • Personal loan
  • Government loan
  • Organ credit

Credit types after provision:

  • Cash advance
  • Trade credit
  • Loan loan

Furthermore, credit types can also be differentiated according to duration, scope, type of collateral, status, amount and use.

Interest: The cost of a loan

The creditor does not lend his money for free.

If he is a profit-oriented company, he will demand interest from the debtor, the amount of which depends, among other things, on the term and creditworthiness of the debtor.

As an alternative to interest payments, the loan can also be settled differently.

Electronics retailers, for example, can consider whether to give their customers an interest-free loan or a discount. The discount not granted in this case is the price of the loan.

A bank often incurs processing fees in addition to interest.

Creditworthiness and Loan Security

The level of interest rates can vary considerably depending on who is borrowing the money and how they are securing the loan.

Creditworthiness: Schufa

For checking the creditworthiness of private individuals, the Schufa exists in Germany, which collects a lot of information about bank accounts, outstanding loans and payment defaults.

Based on this information, it creates a "score" that reflects the creditworthiness from the Schufa point of view.

Loan security: mortgage, guarantee & Co.

The interest burden can be reduced if the borrower provides security that the creditor can access in the event of the debtor's insolvency.

For example, if a civil servant with a regular income borrows money and secures the loan with a mortgage on his house, the interest rate will be very low. In this case, the lender can assume with a high degree of certainty that he will get the money back.

The opposite example is a person without a regular income who has already failed to repay loans on time in the past. With him, a bank will think twice about granting a loan and, if at all, it will pay for the default risk with a high interest rate.