Like all types of economic relations, lending presupposes the presence of a subject and an object. The object of a loan is understood as a thing for which and for which a loan is provided.
The essence of the loan, objects and subjects of the loan
A loan is a certain type of relationship associated with the temporary transfer of funds. It arises when purchasing goods not for cash, but with payment by installments.
There are always two groups in credit relations - the borrower and the lender, which are the subjects of the loan.
The subjects can be private and legal entities, residents and non-residents (foreign companies and legal entities).
Lenders are the party to the credit relationship that issues a loan for a fixed period on the terms and conditions agreed in advance in the loan agreement. These may include not only banks, but also trading companies; pawnshops; enterprises that provide loans to their employees; individuals who provide loans certified by a notary.
The borrower is the other side of the credit relationship, it is directly the recipient of the loan, who turns to the lender to obtain a loan. These include adult individuals who meet a basic set of requirements that vary from lender to lender.
In addition to lenders and borrowers, intermediaries (for example, brokerage companies that provide assistance in obtaining a loan) and guarantors (guarantors who act as guarantors of the timely repayment of the loan) may be included in the number of loan entities.
Types of loan objects
The loan object can be interpreted in three senses. In a narrow sense, it is a thing for which a loan is issued. In broad terms, it is not only the thing itself, but also the process that causes the need for a loan. So, in this meaning, a temporary gap in the company's payment turnover (the need for working capital) can act as an object of lending when it does not have enough funds to make all current payments. The reasons can be very different - this is the seasonality of the business, and the crisis in the economy.
In financial terminology, the object of credit relations is loan capital.
Loan capital is a set of funds that are provided for temporary use on the basis of their return for a fixed fee in the form of interest.
The object of the loan can be not only money, but also specific goods. For example, when applying for a loan at a retail outlet, the borrower does not receive money in his hands, but immediately takes the selected product. This also applies to car loans or mortgages. This type of lending is called targeted.
If the object of lending is money, then it can be issued to the borrower at the cash desk, or credited to a plastic card. Such loans can be revolving, i.e. after payment of the principal debt on the loan, this amount again becomes available to the borrower. Credit cards are an example of such a loan.
Loans can be issued to individuals and legal entities. With regard to lending to companies, loan objects may change. So, in the industry, banks can issue loans for the purchase of raw materials, semi-finished products, finished products. For trading companies, the object of credit is most often the goods that are in circulation. Loans can also be used to finance capital investments - for the construction of production facilities; reconstruction, technical re-equipment, expansion of production facilities, etc.
There are two key types of loan objects - private, which is issued for a specific object and aggregate, issued for a set of related objects. An example of a private object is the purchase of an apartment, the aggregate is the allocation of a loan for the implementation of a business plan, equipment can be purchased with credit funds, premises can be rented, and goods can be advertised.
