Credit cards and signed credits are unsecured loans. This means that they are not supported by guarantees. Unsecured loans generally have higher interest rates than secured loans because the risk of default is higher than for secured loans. This is due to the fact that the lender of a secured loan can recover the guarantees in case of default of the borrower. Interest rates generally vary widely for unsecured loans, depending on several factors, including the borrower`s credit history. Revolving credit is useful for natural businesses or businesses that experience large fluctuations in cash flow or are facing unexpected expenses. Because of convenience and flexibility, a higher interest rate is generally calculated on revolving credits compared to conventional installment credits. Renewable loans are generally granted with variable interest rates that can be adjusted. A line of credit differs from a loan. In both the consumer and industry sectors, the main difference between a line of credit and a closed loan is the initial allocation of credits and whether they can be reused as payments.

While for both products, a dollar cap, called a credit limit, is allowed, credits work in different ways. The terms of interest payments, repayments and credit maturities expire in detail. They include interest rates and repayment date, when a maturity loan, or the minimum amount of payment and recurring payment dates, if a revolving credit. The agreement specifies whether interest rates can be changed and sets, if any, the date on which the loan matures. Loans are granted for a number of reasons, including major purchases, investments, renovations, debt consolidation and commercial projects. Loans also help existing businesses expand their operations. Loans allow the total money supply growth in an economy and open up competition by lending to new businesses. Interest and credit charges are a major source of income for many banks, as well as some retailers using credit facilities and credit cards. The clause may contain other circumstances that would allow the creditor to invoke his rights in the event of default. These events would be tailored to the borrower`s unique circumstances.

Although a creditor can legally claim an immediate refund in the event of default, it rarely does so in practice. Instead, it usually works with the struggling borrower to rewrite the terms of the loan agreement. If the parties agree, the lender will introduce an amendment to the loan agreement with stricter terms and, in most cases, increase the interest rate of the loan and impose an amendment fee. A default is a pre-defined circumstance that allows a lender to demand full repayment of an outstanding balance before it becomes due. In many agreements, the lender will include a contractual provision covering delay events in order to protect itself if it turns out that the borrower will not be able or does not intend to repay the loan in the future. A default allows the lender to seize and sell the mortgaged security to repay the loan. This is commonly used when the risk of failure exceeds a certain point.