Credit policy is what characterizes a bank, its priorities and, ultimately, its products. It acts as the backbone on which marketing, technical, servicing and other processes are based. It is the credit policy that creates the image of a financial institution.

This is how it works. First we set work vectors, then they are implemented, and in the end the effectiveness of set directions is evaluated.

The credit policy is not adopted once and for all. It depends on the economic environment and can change under its influence.

The rate of consumer credit is higher than the target credit, but you can use it as you wish. For example, to make repairs on your home.

With regard to individuals.
Credit policy determines:

which segments to focus on – whether to emphasize consumer loans, mortgages or lending in retail chains;
what programs to introduce – for pensioners, young people or families;
Requirements to the borrower – what will be the age, length of service, income;
The nature of loans – short-term or long-term, of what size, with or without collateral.

All the work of a financial institution is based on this. Its positioning in advertising, the convenience of a mobile application or a scoring system.

Thanks to this image, the experienced user knows which banks he will meet more often in stores, which will consider for a mortgage, and in which will make a deposit.

With respect to legal entities
For legal entities and sole proprietorships, financial institutions decide which industries they want to serve, whether they will focus on certain businesses.

Selection criteria for companies are developed. They are based on transparency of deals, profitability, availability of collateral. Also the organizations can pay attention to the reputation of the manager and inquire about his or her credit history.

All this is very important, because as a rule, the relations of a company with financial organizations are of a long term nature. It is necessary to determine, at the initial stages, how the cooperative work is to be organized.

What credits are there?
Let’s look at the popular varieties of bank loans.

Consumer loans.
A widespread type of credit. In this case, the money is given without the purpose of spending. The client can spend the funds on anything – buy a new phone, make repairs, pay for medical treatment or organize a wedding.

Mortgage.
A targeted type of loan, which is issued for the purchase of real estate. It is also a mortgage, which means that the property you buy is pledged as a guarantee of repayment. If the debt is not repaid, it will be taken away.

Auto Loan.
A special type of loan for buying cars. You can buy both a new and a used car. The car becomes collateral, so the interest rate in such programs is lower and loans are easier to approve.

For business.
Financial organizations develop special programs for companies. Factoring, revolving line of credit, tender lending allow companies to use products with maximum benefit, take money for development, closing cash gaps and much more.

Credit card.
A card with a small limit, which can be repaid without overpayment during a certain grace period, or with interest after its expiry. Convenient to use, but that’s why it provokes more purchases and overpayments. A safe alternative is an installment card.

Credit is a service that has been in demand for thousands of years for a reason. Knowing the math and a balanced assessment of your options allows you to use borrowed funds wisely. At the right time, this money can be a great help, improve living conditions and even become seed money.