Credit is a way of life. One cannot imagine life without credit of any sort. Nowadays even basic necessities such as food, shelter, as well as education have become costly and without availing a credit facility from a bank, a common man cannot hope to survive. This is a vicious circle. Easy availability of credit pushes up the cost of living which in turn forces people to avail more credit. This is an endless cycle which has become part of life today. No one on earth is spared from this vortex. With credit come responsibilities on the part of the lender as well as the borrower. The lender has the responsibility to give quality credit and the borrower has a responsibility of repaying the loan. The banks or institutions which render kreditai do so only after doing a thorough background check on the prospective borrower. His income generating capacity, past repayment records are some of the things which are taken into consideration by the financial institutions before financing him. Naturally the institutions which lend would like to ensure the end use of funds.
The funds lend have to used in a prudent manner for acquiring the asset for which the credit had been sought. Similarly the borrower has a responsibility to repay the loan on time. In case of default, the whole machinery becomes awry and the credit reputation of the borrower too goes for a toss. Banks do make provisions for unexpected losses but if defaults keep on increasing, the banks too would find it difficult to survive. This affects the economy of the country as a whole. Isn’t it really amazing that a simple nonchalant default of loan has got the capacity to disturb the economy of the country? These are the factors which have to be looked into whenever one talks about credit.