The role and functions of credit. Redistributive function of the loan

Of course, lending has not yet gained that pace and is not as close to every person as before 2009, when the global financial crisis occurred.

Consider the analysis and functions of credit in the economy, starting from different types of lending, their conditions and role in the life of borrowers.

Consumer lending for goods

Loan for goods in the store is one of the most common types of loans. Surely everyone at least once experienced such a loan.

The most popular products for which they take credit are smartphones, televisions and other household appliances.

Given the growth of the dollar, the popularity of credit for the purchase of such products is very reasonable. Because almost all digital equipment is imported to us from abroad, and sellers are calculated with suppliers mainly in foreign currency. This directly affects the cost of goods within the domestic market.

After all, the same iPhone as it cost, for example, $ 500, remained the same cost. But due to the depreciation of the ruble, you have to lay out more “pieces of paper” to pay for the goods.

In view of this, there are fewer and fewer people who are able to buy expensive digital, home appliances in cash. And those who need it, take such a loan, perhaps through Home Credit ATMs with the function of issuing funds.

That is, when using such a loan, a person does not need to save a certain amount monthly under his pillow and wait for the time when he will accumulate the necessary funds.

Cash lending (collateral and unsecured)

This type of loan is useful for those who urgently need money for personal purposes. Banks take advantage of this and use higher interest rates for such loans.

Usually such loans are taken by people who want to have a wedding, go on a trip, pay off their debts. Often people with various diseases take cash loans for treatment. Moreover, if the disease is fatal, then it is unlikely that they will give out a loan, especially without a collateral or guarantor.

The boundary amounts of lending volumes can fluctuate quite a lot. If you have several guarantors and property as collateral, then you have a great chance to get a loan for a decent amount of money.

What are the functions and role of a cash loan? With the help of such a loan, you can quickly solve current issues with your finances, as well as use it for a trip or a dream.

Car loans

The car is now very expensive. Sometimes their value exceeds 5 zeros in dollar terms, and it is easier to buy an apartment than an expensive car.

Given the fact that people's incomes are declining in relation to foreign currency, as well as a decrease in consumer demand for cars, the times going through this lending sector are not the best.

But despite this, banks continue to actively issue loans for cars. A feature of this type of service is that the client does not receive money in his hands. Upon successful conclusion of the contract, the banking institution transfers funds directly to the car dealership. A mandatory clause of such an agreement will be that in case of loss of solvency, the lender has the right to select a car, since it is a collateral.

This loan is good in that it can be borrowed for a sufficiently long period of time (some banks offer up to 20 years), and it is also a great opportunity to buy a good car right now, without having to save money in a piggy bank for ten years.

Real estate lending

This type of lending is in decline. For the most part, this is due to the current current housing prices and the salary of the main population of Russia. It would seem that the beginning of 2000 was not yet so far away, when a much larger number of customers registered such a service.

Due to the tightening of lending rules, a positive decision on applications does not always come.

The most popular type of such loans among individuals is mortgage. For young people, this is an ideal option to buy a roof over your head, because making money in your own apartment or house in a short time, especially at a young age, is quite difficult, and few are capable of it.

Overdraft lending

Overdraft is the most profitable small loan for those who have a salary card of the bank in which such a credit decision is made. In fact, this is the same credit card, but on more favorable terms, therefore such a loan is rarely offered by bank employees on their own.

All the functions and principles of the loan, this service has gathered in itself one, but at a lower percentage. It makes it possible to “borrow” a small amount of cash from the bank with minimal interest. Agree, it is very convenient when you have a credit limit, and you do not have enough money to buy products in the store.

What is the role and functions of lending, which is focused on the population?

Based on the foregoing, the following loan functions can be distinguished in the most popular areas of lending to individuals:

1. Stimulate the movement of capital. That is, money from some sources (for example, the banking sector) is transferred to completely different sectors of the economy.
2. Improve the well-being of people. This is due to the fact that people receive benefits until the moment when they have their own purchasing opportunity.
3. The loan performs the functions of developing the banking system and microcredit sector in the economy of the whole country. First of all, such loans are sources of income for banks. If banks do not engage in lending, then they simply will not be able to make payments on deposit agreements.

Credit and legal entities

There are different types of loans, but there is no need to understand each of them separately, since they differ in only a few conditions.

The main objective of such lending is to replenish working capital for doing business or buying new (or improving old) fixed assets.

In addition, a loan can be taken under a new business plan and various investment projects of the enterprise.

What is the role of a loan that is intended for legal entities?

We highlight the main functions of the loan:

1. Economic development. Due to the fact that enterprises have the opportunity to work with borrowed capital, they have the opportunity to move to higher volumes of production, and this, in turn, increases the country's gross domestic product.
2. Market improvement. The company that took the loan is simply obliged to reduce its costs and increase revenues. For this, a reduction in the cost of manufactured products or services should occur. And if this happens, the company begins to increase its competitive ability, which may affect the structure of the market. In turn, other manufacturers in the same sector will also have to develop if they want to maintain their positions and their market share.
3. Credit control functions. For example, when banks provide credit to a legal entity, they begin to constantly monitor and analyze the financial statements of the borrower. This is done so that the creditor sees in time crisis situations at the enterprise, if any. After all, he is interested so that the debtor can fulfill its obligations.

Functions state loan essence and international economic relations

In principle, the functions below are somewhat similar to those described previously.

Taking into account all possible types of credit relations, we can distinguish the following loan functions at the global international level:

1. Financial help.Observing the current situation in Greece, you can better understand this function. Indeed, sometimes without additional financial injections of creditors from the outside, it is impossible to save the state economy from collapse. Given the functions of state credit and the fact that they are issued mainly for long periods (decades) and at low interest rates, which are at the level of 1-5%, we can consider such money as real help from international organizations.
2. Supervisory functions of a bank loan. For example, take the IMF. When this organization gives a loan to any country, its specialists carefully study the economy of the future borrower and develop various programs to maintain solvency. And at the moment when it becomes clear that the country is going in the wrong direction, that its economic activity is not conducive to improving business activity, the IMF ceases all funding until the country changes its mind. This helps the world community to stimulate countries to develop and improve the economic sector.
3. Investment functions of international credit. Such loans allow countries and international organizations to earn money, as well as credibility and partners. Indeed, in order to establish political relations with any country, it is necessary to contact it using financial instruments. And help in the form of a loan for the development of a certain sector of the economy at a low interest rate is a great way to make a new friend.

If we analyze the global economy, then such actions have always met warmly from the side of the borrower countries and paid off doubly.

What are the common functions of loans?

Each specific loan at its macro level has certain tasks, but in general, the following are distinguished in the economy:

1. Redistributive function of the loan. This function is expressed in the redistribution of funds that are material goods. Imagine that one company or person has, for example, $ 1 million, which are temporarily unnecessary funds. And there are 10 people who need 10 thousand dollars each. If we talk about the current state of affairs, it turns out that all the capital is collected in one place. The situation will change if a company or person distributes 10 thousand to everyone in need. In this situation, capital will to some extent be distributed to a larger sector of the economy, albeit for a certain period of time. But the question is, why would someone give out their money just like that? That's right, it never will be. A loan involves a fee for its use, as well as repayment of the amount of debt. This is the redistributive function of credit, which is associated with the distribution of funds in different sectors of the economy.
2. Capitalization. Credit relations mean the payment of interest for which the lender gives money. And in turn, the borrower agrees to pay money for the opportunity to use the funds provided to him. That is, the functions of the loan include the multiplication and earnings of capital.
3. Emission. Lending replaces real money. Suppose 100 people work in one country. The total money supply is at the level of 1 million rubles. The income and expenses of each person in the country are at a different level. This contributes to the fact that someone has the opportunity to save money, and someone monthly spends absolutely all of their income. There comes a time when one of those people who do not have the opportunity to put off takes a loan from the "rich" for some time to buy a conditional product. At this point, the total money supply does not change. And imagine another option: a person began to work abroad for more money. His financial condition has improved. But in order to make purchases within the country, he needs to exchange foreign currency.But how to do this if the total money supply is at the same level and is completely distributed across various market sectors? The answer is that the state should increase the amount of money. Due to the fact that there are credit institutions, the state does not need to issue and print new money.
4. Conversion. Often this function is expressed with cashless loans. Everyone knows that state financial institutions strive to gradually make paper bills a thing of the past. There are several reasons for this. The first is that every year you need to spend a large amount of money for printing bills. Indeed, over time, they tend to wear out and lose their appearance, suitable for calculations.

Also, the state should spend its resources on ensuring regular protection of banknotes, constantly applying new means of protection to them, avoiding massive counterfeiting of currency.

Another such reason is that virtual money is much easier to track. Those who perform transactions in this way have their own bank accounts. This makes it much easier to track cash flows. And in the case of cash, tracking the movement of such capital is virtually impossible. Because of this, the level of possible control is significantly reduced.

So, thanks to loans, in which money is not issued in cash to the borrower, they contribute to monetary conversion into non-cash form. This state of affairs as a major financial institution is only at hand.

What conclusions can be drawn about lending in general?

Thanks to loans, the movement and development of the economy becomes faster. This is due to the fact that the necessary goods are bought faster, thereby people are more actively investing their money in the national economy.

For borrowers, the loan performs the function of increasing purchasing power. That is, not having the full amount on hand to buy a product, if necessary, you can immediately buy it.

At the state level, credit services of international organizations are a means of saving the whole country from defaults, crises and other economic problems.

The main thing is that the country's leadership should use the provided financial resources in the right direction, and not in the pocket. Otherwise, such bonds will sooner or later become unbearable, which will lead to a deterioration of the country's economy and, as a result, to its crisis or collapse.