Loan Interest is a monetary remuneration received by the lenders for providing their funds.In fact, this economic category is the price of the loan, the borrower pays for the use of money to creditors.
loan capital and interest
free cash assets that appear in enterprises, companies and other economic entities, and then transferred to the temporary use of other companies are loan capital.They produce their movement in the market and have a price in the form of loan interest.
existence of the indicator is due to the presence of commodity and money relations.Since ancient times, people have started to provide various types of loans in kind to pay interest in the form of grains, cattle and others. In terms of issue of money in the form of loan interest is paid in cash, respectively.Today
lending rate appears when the owner passes a certain value to another for temporary use.This is usually done for productive consumption.The lender, abandoning the current use of material resources, is aimed at generating revenue lent cost.Attracting the borrowed funds entrepreneur does this for the rationalization of production and increasing the profits out of which he will be required to pay interest.
Loan Interest: mechanism of
in market conditions in the credit relations of loan interest rate close to the average level of profits.In the context of free movement of capital credit funds flock to the sphere, which allows you to get the most profit.At the level of income in the manufacturing sector higher than the percentage of the loan funds are moved to this area, and vice versa.If the rate of profit and profitability in any area of the economy is higher than the lending rate, the cash flow in such investments.
Market interest rates for various assets changed.Their level may either rise or fall.The formation rate of interest affect macroeconomic and private factors that underlie the interest rate policy of creditors.
One of the macroeconomic determinants is the ratio of supply and demand loans.By reducing the demand for borrowed credit assets, which is observed during periods of economic downturn, there is a decrease in interest rates.The opposite effect occurs when the central bank reduced lending to the economy, as a result of lending rate increases.
interest rates affect the level of development of the securities market and monetary assets, which directly depend on each other.Thus, increasing the yield of securities financial institutions to adjust rates.This dependence is more pronounced in the more developed market securities.
Loan interest depends on the state budget deficit and the need to cover the lack of money borrowed funds.In this case, the loan market is an increase in interest rates, which ultimately leads to a reduction in private investment, as many of them lose their profitability.
Factors affecting the interest rate, are as follows: the balance of payments, the national currency, international migration of capital, inflation expectations and processes, the volume of cash savings of the population, the tax system, the risk factor while holding credit transactions.
special factors arise because of the particular operating conditions of the creditor, on its position on the market of borrowed resources, the nature of the operations and the degree of risk.
