Principles of Bank Lending

Thus, term means that the borrower should repay the debt not at any time convenient for him, but within the clearly specified period in the loan agreement. At the same time, violation of the term may be grounds for the lender to impose penalties – up to an increase in the interest charged or recovery of the principal amount plus interest accrued for the entire term through court proceedings.<\/p>\n

The principle of lending without which the concept itself cannot exist is the repayment of money. This, in turn, means: the debt must be repaid within a specified period, which is stipulated in the loan agreement. Moreover, the repayment terms for the loan may vary depending on the intended purpose and type.<\/p>\n

Since the принципы банковского кредитования<\/a> are closely interrelated, repayment is directly linked to its security and depends on the borrower's ability to guarantee the bank timely repayment of the loan. That is, the lender must obtain additional guarantees from the borrower for the return of money.<\/p>\n

Today, the principle of repayment contributes most to reducing the risks of non-repayment of funds. Repayment is ensured through bank guarantees and their insurance. However, currently there are other forms that ensure repayment of loans – these can be transfer of property rights or assignment of claims.<\/p>\n

The principle of payment consists in the bank charging the borrower a certain fee for the temporary use of its funds. Namely, the fee for the loan is charged by the bank in the form of an interest rate stipulated in the contract. Therefore, the interest rate is a kind of payment for using the bank's money.<\/p>\n

The principle of differentiation is the dependence of interest rates on the type, target purpose, and term of the loan. Differentiation will depend on the borrower's indicators and solvency.<\/p>\n

And the last principle is targeted use. It means that the loan issued by the bank must be used only for its intended purpose.<\/p>\n

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