Credit

A credit is a financial operation in which the owner of the money (the creditor) transfers his money to someone else (the debtor) for a specified period of time under a contract, typically in the hope of credit interest. The creditor is most often a bank, while the debtor is an individual or a company.

If we give someone a credit, we sign a contract in which we agree on the method of repayment and the credit interest rate, which is the price of the money. In addition to interest, other costs may also be associated with the credit, if we take out the loan from a bank, then almost certainly. 

If we take out a loan as an entrepreneur, then its costs (primarily a interest, but also the different rates) are current profit after tax is reduced. This is very important because there are others financing also forms that do not work like this (for example a leasing, the capital raising). Before applying for a loan, it is definitely worth reviewing the options available to our business. It is advisable to decide on borrowing if the result ensures repayment, or if the profit increases precisely because we use the loan to buy, for example, new production equipment, which improves efficiency and, with it, profitability. 

There are many types of credit. 

Products can be differentiated, for example, by whether their cover. Based on this, we can talk about secured or unsecured credits. There may also be differences within secured loans based on whether the collateral is the property that we buy from the credit or a property independent of the credit transaction, possibly other credit guarantee. 

In addition, these banking products can be grouped into a credit purpose according to what the debtor can use the resources obtained through this. We can speak according to this aspect, among others overdraft, current assets financing, and investment credit, to mention only the most common ones. 

Credits can be distinguished a term based on its length, so we can have a short-, medium-, or long-term loan. Among the credit types, we can find different methods based on the interest rate, for example variable and fixed interest rate versions. In addition to all of this, there may be considerable differences between the contracts based on how the burden of repayment is shared between the debtor, the co-debtor, and possibly the guarantors between. 

And then we haven't even talked about combinations of all these. 

A business most often borrows from a bank. In general, the bank also helps you navigate between the types of credit by developing different loan schemes for individual purposes, or for certain groups of credit applicants, for better transparency. These typically state in their name who, according to the bank, should take out such a credit (individuals, for small enterprises, for large enterprises among other things) and what purpose they serve (consumer credit, current assets financing capital loan, investment credit, overdraft loan).