Bank Loan Variety Motors Modern Finance
Banks evolved from the concept of a royal treasure room to a strong room where hired guards watched over valuables. Keeping assets safe was the principal cause.
Banking as a concept didn’t get wide spread action until the concept of interest payments on loans (and social conventions against charging interest) became mainstream. This is the foundational idea behind modern finance.
There is no bank in the world that does not issue loans; it’s their primary reason for existence. Modern banks offer a wide array of loan products for every consumer (and business) need.
All of which comes at a nice interest though! Speaking for myself, my first relationship with a bank was when I opened my first savings account. But it has been the bank loans that have made me dependent on the bank for my survival.
In fact, my first loan was for the purchase of my first new car. After this, I took a home mortgage loan to purchase a condo.
You see, it’s unlikely that anyone has money sitting around to buy a house for cash on the transaction. Most people lack the discipline to save money every month for a house when paying rent; this opens up the next kind of bank loan – the mortgage loan.
A typical bank loan for a home runs 15 to 30 years, and most people will end up accruing equity in a home, paying interest on it, and otherwise, becoming home owners in fee simple.
Other bank loans are issued for various reasons, from personal loans to buy items that matter to you, all the way to lines of credit tied to an asset. Personal loans are usually used for things like marriages, emergencies, and major repaired. Secured loans are usually tied to improving the value of the asset that’s securing the loan.
This type of loan is also sometimes used to buy things like computers and home renovations; basically anything that doesn’t require a significant portion of the borrowers income is a valid target for this kind of loan.
Broadly speaking, even credit cards are a form of a bank loan that you can repay. And some banks even offer you loans to pay up other loans you may have taken in the past!
All of these consumer bank loans, mortgages included, are nothing compared to the banking transactions build on inter-business lending.
To give a sense of perspective, the total business loans issued are 99.99% of all the debt issued in the world. And are one reason why the financial bailout of the investment banks was such a high priority to Congress.
One could go so far as to say that without bank loans, the vast majority of business worldwide would collapse. Small wonder then that banking, and by association investment, lending, finance and credit are the words that drive business in the modern day.