Elements, Objectives, and Function of Credit

Have you heard the term credit? Of course the answer is often. In everyday life, we often encounter the term loan. Both in the process of buying and selling as well as in the form of loans to banks. But, you know the definition of credit? Put simply, credit is a transaction or a deferred payment agreement.

Definition of Credit
The term loan actually comes from the Latin, yatiu credere, which means 'trust'. Meanwhile, according to Big Indonesian Dictionary, credit means a loan up to a certain limit to the amount allowed by a bank or other entity. According to the origin he said, the credit means 'trust'. Therefore, the trust became one of the most important factor in a credit process.

Elements of Credit
The following are the elements contained in the credit.

1. trust
Confidence the bank as lender of accomplishment given to debtors to repay the mortgage according to a predetermined time period.

2. period
The time-scale has been agreed regarding the provision of credit by banks and credit repayment by the debtors.

3. achievement
Achievement may be regarded as an object of interest or fee agreed upon banks and debtors.

4. risk
To avoid bad risks in the credit agreement, was held binding angunan or warranties are charged to the debtors or borrowers.

Loan purpose
Here are a few credit purposes.

- Banks as lenders gain the advantage of interest, administrative costs, rewards, fees, and other fees charged to debtors or borrowers.

- Business debtors or borrowers will increase. With the granting of credit and investment capital loans, the borrower is expected to increase their business.

- The amount of credits channeled to improve implementation of development banks in the economic sector. Thus, the provision of credit can help the government's job.

Credit function
Besides having a goal, credit has the following functions.

- Enhances the usability of the money.
- Increasing the amount of money in circulation and traffic of money.
- Increasing the value or usability of the goods.
- Increasing the circulation or distribution of goods.
- As a means of supporting economic stability.
- Activate and enhance the usefulness or the existing economic potential.
- As one of the bridges increase the national income distribution.
- As one means to establish international relations.

That discussion includes an overview of the credit which the elements, goals and functions. Hopefully this article can add to your insight on credit so it can be used as a reference before applying for a loan. However, credit is beneficial to both parties over the interest rate set at reasonable levels.

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