Credit (finance)

Credit is a financial facility that allows a person or business entity to borrow money to buy products and pay it back within a specified time period. Law No. 10 in 1998 states that credit is the provision of money or bills that can be equated with that, based on the approval or agreement to borrow loans between banks by another party that requires the borrower to repay the debt after a certain period with the provision of remote interest. If someone uses a credit services, it will attract interest charges.
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Credit Terms

When banks lend money to customers, the bank certainly expect their money back. Therefore, to minimize risk (the money is not returned, for example), in providing bank loans should consider a few things related to good faith (willingness to pay) and the ability to pay (ability to pay) customers to pay back the loan with interest. These consist of Character (personality), Capacity (capacity), Capital (capital), Colateral (guarantee), and Condition of Economy (economic conditions), or often referred to as the 5C (five C).

[edit] Characters

Character, nature, customs debtor (party who owes) is very influential in the provision of credit. Creditor (the lender) can investigate whether the debtor entered into the Register of the despicable (DOT) or not. For that creditors can also examine his bio and information from their business environment. Information from the business environment can be obtained from the supplier and customer of the debtor. Moreover, it can also be obtained from Central Bank information, but can not be obtained easily by the general public, because the information is accessible only by employees of the Bank's credit by using the password and the computer connected on-line with the central bank.


Capacity

Capacity is related to the ability of a debtor to repay their loans. To measure, creditors may examine the debtor's ability in management, finance, marketing, and others.

[edit] Capital

By looking at the amount of capital owned by the debtor or to see how much capital invested in the business debtors, creditors can assess the debtor's capital. The more capital invested, the debtor would be considered more seriously in business.

[edit] Security

Required to guarantee in case the debtor can not repay loans. Usually the value of collateral is higher than the loan amount.

[edit] Economic Conditions

Economic conditions in the surrounding residential debtor also must be considered to take into account the economic conditions that will occur in the future. Economic conditions that need to be considered among other issues the public's purchasing power, market area, competition, technological developments, raw materials, capital markets, and so forth.