What is credit? Answer all credit information

1. What is Credit?

Let's learn about the concept of credit and bank credit with SeABank: 

• Explain the concept of credit 

Credit is a form of lending between a borrower and a lender. The lender will transfer the right to use money or goods or material to the borrower. When the agreed deadline arrives, the borrower must repay the loan in full or with interest on time. 

• Explain the concept of bank credit

Bank credit is a borrowing activity between a bank and a business or individual who needs a loan. At that time, the bank will provide capital to customers for a certain period of time. When due according to regulations, the customer must repay the loan according to the interest rate as committed in the contract. 

2. Characteristics of credit

Credit has the following basic characteristics:

• Based on trust: Lenders only grant credit to borrowers when they have confidence in using the loan capital for the right purpose, effectively and with the ability to repay on time.
• Temporary: Loans only have the right to "temporary loans" for a certain period of time, from the beginning of the contract until the end of the contract term between the borrower and the lender. 
• Suitable for many subjects: Vay credit suitable for many objects, including individuals and businesses, as long as the borrower meets the lender's requirements and conditions. 
• Repayment of both principal and interest: By the contract term, the borrower has the obligation and responsibility to repay both principal and interest to the lender. 

3. What is the role of credit?

Credit plays an important role for individuals, businesses and the economy, specifically as follows:

• Promote the process of expanded reproduction, contributing to regulating the macro economy.
• Contribute to promoting the process of capital concentration and production concentration.
• Save on social circulation costs.
• Tools that contribute to the implementation of social policies.
• Credit supports loans for individuals to use for activities such as daily expenses, buying a house, buying a car... contributing to stabilizing life. 
• For businesses, credit supports revolving capital to promptly maintain production and business activities, pay staff salaries...

4. Classify popular forms of credit today

Below are popular forms of credit that are being applied today: 

According to collateral requirements

Borrowing capital based on collateral requirements has the following 3 basic forms:

• Unsecured loan: Is form loan capital No need to mortgage any collateral. This form of loan is based on the borrower's reputation and proof of assets.
• Mortgage loan: Unlike unsecured loans, mortgage loans require the borrower to use assets or valuable documents to ensure loan payment. Guaranteed assets including: house, land, car, goods... Valuable documents include: land use right certificate, car registration certificate, motorbike registration certificate, savings book, salary book...
• Overdraft loan: A form of loan for individual customers who need to use more than the amount of money currently in their payment account at the bank. When a customer takes an overdraft loan, it means you are borrowing money from the bank to pay for your payment needs. The bank will rely on the customer's creditworthiness to grant an overdraft limit. VOverdrafts usually have a short term (maximum 1 year) and have higher interest rates than other forms of loans. On the current market, there are unsecured overdraft loan products and mortgage overdraft loans.

According to loan purpose

Credit is classified according to loan purpose and has the following 04 specific forms: 

• Consumer loans: These are personal loans for the purpose of spending on daily life activities such as purchasing furniture, medical examination and treatment, beauty treatments, traveling, daily food expenses... 
• Production and business loans: A loan that uses capital as working capital for a business. Businesses use this loan to purchase equipment, goods, services, pay employees and pay taxes to the state. 

• Loan to buy real estate: A loan for the purpose of buying and selling real estate for residence or business (for individuals) or building production facilities or buying land for investment (for businesses). The borrower can use the red book of the land to be purchased as collateral. 
• Car loan: A loan for individual customers, to meet the needs of buying a car for travel, rental or business use. The loan is suitable for both businesses to use as official vehicles or for business purposes such as transporting goods or vehicles for business trips. Just like borrowing to buy real estate, the borrower can use the car they will buy as collateral for the loan. 

By term

Credit is divided into 03 specific loan terms below:

• Short-term credit: These are loans with a term of less than 1 year (12 months).
• Medium-term credit: These are loans with terms from 01 to 05 years (from 12 - 59 months).
• Long-term credit: These are loans with a term of 5 years (over 60 months) or more. 

According to registration method

There are 03 quick ways to register for a bank loan: 

• Online loan: Borrowers can register, complete documents, and verify online via the App on the phone easily. Borrowers can receive disbursement via bank account or directly in cash. 
• Borrow directly at a bank branch: Borrowers come directly to the bank's transaction office or branch to register and complete the loan application. 

Customers can borrow directly online through the SeABank App or borrow directly at SeABank branches to register, complete documents and support the fastest loan procedures. 

• Borrowing via card (credit card): The borrower will be granted a loan limit via the bank account attached to the card. As you spend, this amount will gradually decrease and the amount of debt will increase corresponding to the amount spent. Customers will have to pay the entire principal and interest in the following month in accordance with regulations to continue borrowing. 

According to the level of loan interest calculation

• White credit: It is a form of credit recognized and controlled by the State. This form is applied by commercial banks, credit institutions, and financial companies. Loan information is transparent, ensuring the rights and obligations of all parties, interest rates are adjusted from time to time according to the regulations of the Central Bank. 
• Black credit: This is a form of loan that has a negative impact on the borrower and is not recognized or guaranteed by the State. This form is provided by unofficial organizations and individuals and has very high interest rates. In addition, this form of credit does not have transparent contracts, debt collection methods are annoying and can be dangerous for borrowers.

5. Conditions for granting credit

To receive loan repayment, the borrower needs to fully meet the loan credit conditions: 

• Borrowers are legally qualified: The bank supports credit loans to organizations and individuals with full legal status including: over 18 years old, with civil capacity, and the company operates normally. 
• Loan capital is used legally: Borrowers need to prove that the purpose of the loan is legal and need to prepare necessary documents such as a plan to use the loan effectively, which will help the bank have more confidence when granting credit. For individuals borrowing money, it is necessary to clearly demonstrate the purpose of the loan such as buying a house, buying a car, consumer loan, investment loan. Businesses need to prove they will use the loan for its intended purpose. Clear and reasonable business activities such as expanding production, purchasing machinery and equipment or building infrastructure.
• Borrowers have financial capacity: The borrower ensures to repay the loan in full on time as committed. Individuals need to have necessary documents proving financial ability such as labor contracts, payroll, bank account statements and a stable income. For businesses that need to provide financial reports, tax reports and future financial forecasts. This is also a condition for lending organizations to review and approve loan applications.

• Make loan guarantees according to regulations: For loans with collateral, nBorrowers need to secure the loan with assets such as real estate, cars, savings books or insurance of equal value to the loan. For unsecured loans, borrowers need the ability to repay debt through payroll and good credit history and sign a commitment to fully repay the debt. 

6. Credit request documents

To apply for credit, borrowers need to prepare the following credit request documents: 

1 - Individual loan documents:

• Paper Proof of identity: Citizen identification card, passport, tiger registration book are guaranteed to be legally valid.
• Documents proving income: For individuals, a salary statement, labor contract, and insurance are required. 
• Credit history: The bank will check the individual's credit history through credit institutions to evaluate the borrower's previous borrowing and payment history. If an individual has bad debt or late payments, the ability to borrow will be low. 
• Documents proving ownership or mortgage: land use rights certificate (red book/pink book), or vehicle registration certificate. 

2 - Business loan documents:

• Business registration certificate: Determine which business is legal and operates in which field.
• Financial reports: Businesses need to provide information about financial statements, company account statements, balance sheets, tax reports and goods/service purchase invoices.
• Detailed loan plan: Clarify the purpose of using the loan and how businesses use loan capital to develop production or expand business.
• Credit history: The bank checks the business's credit history, including previous loans and ability to repay debt. If a business has bad debt, the bank will evaluate the impact on its ability to borrow capital.

Collateral documents: Includes certificate of property ownership or land lease contract (if borrowing to invest in the project).

7. Factors affecting credit granting

Below are the factors that affect the credit granting decisions of banks and credit institutions: 

• Credit policy of the State Bank: The State Bank will introduce policies on interest rates and money supply to regulate monetary policy to stabilize the macroeconomy. This will directly affect credit.
• Bank's capital policy: Each commercial bank has its own lending support policy for target customers. Depending on time, support policies on interest rates, limits... are adjusted according to regulations, which will affect credit interest rates and credit limits.

• Business development in which the customer sector participates: If the business market trend in which the customer participates is decreasing, the loan will be very difficult to disburse.
• Results of customer credit history appraisal: If the borrower has bad debt appraisal results, it will affect the credit granting decision.

8. Some related questions about credit

1. What is a credit card?

Credit cards are also known as Credit Cards. This is a type of bank card that allows the cardholder to spend within the credit limit that the bank has granted based on the agreement between the two parties. In other words, you are "temporarily borrowing" money from the bank to shop, spend in advance and will repay all or part of that amount at the end of the specified period. 

>>> SEE MORE: What is a credit card? Conditions for opening a credit card 

2. Is a credit card a form of bank credit?

A credit card is not a form of bank credit. Because with a credit card, the customer is given a source of capital in advance, but it is only charged when the customer uses it. If customers do not use this source of money, interest will not be charged. 

For more detailed information about credit, please contact the phone number immediately Science and Technology 1900 555 587 – Science and Technology 1900 599 952 or accessenter https://www.seabank.com.vn/ for the fastest support and answers.

The above article has answered questions about What is credit?, role, form of credit and requirements when borrowing credit from SeABank. Credit supports and plays an important role in contributing to the economic development and life of each person. Hopefully through this article, you have a better understanding of what credit is and can meet the credit loan conditions.