subject: On Credit And Why It Is Vital To The American Economy [print this page] Credit has always been a vital part of the economic activity of any country. Through the acquisition of credit, businesses are able to expand and, at the same time, sustain their operations. Through loans, private individuals are able to acquire valuable things such as homes and cars, and, at the same time, pay for bills and other expenses.
It is the demand for loans that is the reason for the existence of banks and other financial institutions. Loans vary in terms of interest rates and charges, and the purpose for which it is about to be used. The amount of money being extended as loans and the requirements in securing them are dependent on the type of the issuing financial institution.
Banks and other formal creditors are the ones with the most types of loans on offer to borrowers. In terms of the amount of money being loaned out, they are large; fit to support a start-up business or the purchase of a home or a car. In order for one to secure a loan from a formal creditor, he will undergo a rigorous series of processes and, at the same time, submit pertinent requirements that will be examined carefully by the creditor before releasing the actual loan net of the interest rate and other charges.
On the other hand, non-formal creditors, which operate in several states such as South Dakota, payday loans and other similar forms of credit can be obtained from them. These loans are usually smaller in amount; good enough to pay the usual bills and support sudden needs. Compared to formal creditors, informal creditors are not that strict in terms of requirements, although they charge relatively exorbitant interest rates and other charges to borrowers.
Both formal and informal creditors are closely being monitored by the federal and state governments. Several federal agencies such as the Federal Reserve Board are the ones tasked to monitor banks and other formal creditors. On the other hand, in states such as South Dakota, payday loans and similar products and services, and operations of informal creditors under state-level agencies.
From New York City corporate loans to South Dakota payday loans, credit is a vital ingredient of an economy. It is the fuel that drives the flow of commerce 24/7. It is also the spirit that makes the American economy the worlds greatest.
