If you are thinking of applying for a loan for your business, you must first know each of the components of credit.
The elements of a loan
1. Lender and borrower
What is a lender and a borrower? The lender is the one who lends the money, that is, the creditor or a financial institution. The borrower is the one who receives the loan, in other words, the debtor .
2. Interest and term
The interest rate is how much more money you are going to have to pay back in addition to what was presented to you.
The term of a loan is the time you have to pay it off, that is, the number of months or years you have to cover your debt.
For example, if you ask for 1,000 pesos with a monthly interest rate of 10% and with a term of one month, you will have to pay 1,100 pesos after thirty days.
3. Payments and commissions of a credit
Commissions are the amount of money that a financial institution charges for carrying out administrative procedures for a financial product or service.
The payments relate to the amount of money you need to pay, including interest, according to your method of payment to pay off your debt.
4. The guarantee
The guarantor is a person or entity that undertakes to respond for you in the payment of your debt, in the event that you cannot meet your financial responsibility. An example is the solidarity guarantee. This occurs in the cases of group loans in which a group of people meet to apply for a loan: if a member cannot pay, they must all support each other and cover the debt.
As you can see, there are several elements that make up a loan , before applying for a loan, review every detail and choose the one that best suits your needs.