Borrower is ... Protection of borrowers. Borrower - Definition

The functioning of the financial system in the world is impossible without such an important mechanism as lending. A loan is an economic relationship that arises between the subjects of a financial transaction, consisting in the provision of loaned (borrowed) value for the achievement of certain goals, provided that it is repayable, payable and urgent.

Credit system

The purpose of the credit system is to mobilize free funds to provide them for urgent use for a fee. The basis of the system is a commercial banking structure. Its main activity lies in the area of loans and deposits and deposits. In addition to commercial banks, important participants in the credit system are: the Central Bank, specialized credit and financial institutions. Most countries have three- or four-level credit systems: at the first level - the Central Bank, on the second - various forms of banks (savings, investment, mortgage, commercial). At the third level, non - bank credit and financial institutions. Particularly stands the fourth level, which includes insurance and pension funds, credit unions and others. The functioning of the system is ensured by interaction between participants in credit relations.

Subjects of credit relations

The subjects of these relations are the creditor and the borrower. Relations between them are determined by the need for money in the borrower and its availability, and most importantly, the possibility of issuing from the lender. Thus, the creditor is the party that provides the loan (loan / loan). The Borrower is the party that receives the loan (loan / loan) and assumes obligations to repay the borrowed funds on time.

The same person within the framework of financial and credit relations can simultaneously act both as a creditor and as a borrower. The definition of it in this case is such that, for example, a private person, when making a loan with a bank, acts as a borrower, the bank in this case as a creditor. At the same time, the presence of a deposit in the bank changes the participants of the relationship in some places. And already a private person is a lender, and the bank is a borrower.

Object of credit relations

The main component of the relationship between the borrower and the lender is the transfer object. The object of transfer of credit relations is the loaned, or so-called unrealized, value. In other words, the lender has free funds that have settled in him and stopped in his movement. Thanks to the loan, it becomes possible to launch a new cycle to continue the turnover and send funds to circulation. To do this, it is sufficient to issue a loan to the borrower under certain conditions. From this point of view, the borrower is a person who, through the receipt and turnover of the advanced amount, allows the circulation of finances not to be interrupted. And this ultimately accelerates the reproduction process. It is the advancing nature of the loan that is an important feature of credit and financial relations.

Another important condition for the functioning of the credit facility is the return and preservation of the right of the creditor's property to the funds that are provided for use by the borrower. One of the guarantees of recoverability is the creditworthiness of the borrower.

The fundamental principle of credit is the preservation of its value

By providing its funds for the use of the lender, it is important to at least keep them and maximize them as much as possible. Fulfillment of these conditions is a fundamental quality of credit.

In reality, it is not always possible to implement it completely. The main danger facing the participants of credit and financial relations is inflationary processes. The result of overflow of money circulation channels is a surplus of money supply and, as a consequence, a decrease in its purchasing power. The Borrower is a person who takes upon itself the obligation to repay the loan. But in the situation of inflation, the returned money, with the preservation of the nominal size, actually have already discounted form. However, there are a lot of other risks, in the event of which the borrower can not repay it in accordance with the terms of the loan. And it is not always the fault of the debtor alone. Often it is the violation of his legal rights that leads to such sad results.

Protection of legal interests of borrowers

Initially, in a loan relationship, the borrower is a weaker party from a legal point of view. Financial organizations minimize the influence of the client on the content of the loan agreement, thereby limiting its ability to influence the conditions for the provision and payment of a loan. This compels to sign contracts that are most beneficial to the creditor, but at the same time infringe upon the rights of the borrower. The most common violations of the rights of the person who borrowed:

• Calculation of the interest rate for using the loan for the whole body of the loan (and not for the balance of the debt);
• Charging commission for issuing a loan;
• Accrual of a penalty not corresponding to the amount of the principal debt;
• Jurisdiction of the dispute over the territoriality of the creditor bank;
• Insurance of borrowers as a prerequisite for obtaining a loan;
• The inclusion in the loan agreement of the terms for charging a commission for maintaining a loan account and issuing a loan.

FZ RF "On consumer credit (loan)"

From July 1, 2014 in the Russian Federation, Law No. 353-FZ entered into force. Its purpose is to regulate the relations that arise in the process of providing a consumer loan (loan) to an individual, if the loan is not issued for the conduct of entrepreneurial activities.

The main goal of the Law is to bring order to the consumer lending market and protect borrowers. Unfortunately, until recently even stable banks with high reputation allowed themselves to use legal illiteracy of clients. Focused on the provision of legal protection of loan recipients, the law clearly regulates the following points:

• Standardization of the form of the loan agreement;
• Restrictive nature of the amount of penalties charged in the event of a delay in payment of a loan;
• Restriction of the retail lending rate;
• Clarification of the mechanism for calculating the effective interest rate;
• Strengthening of control over the work of microfinance structures;
• Regulating the work of collection services.

Millions of people live on credit

According to statistics, from 60 to 90% of working citizens of the country have outstanding loans. At the same time, the popularity of loans is steadily growing. Citizens in an agiotage conclude credit contracts. And banks, minimally checking the creditworthiness of the borrower, are ready to provide loans. Sometimes it is enough to show one passport. It is in such ease and availability that a "time bomb" is built, which can strike both the creditor and the borrower. If the recipient of the loan is unable to repay the loan, then this is already a problem not only for him, but also for the lender that issued the loan. It is important to soberly assess the risks and the level of responsibility and make out a loan only with 100% certainty in its redemption.