Banks evolved from the concept of a royal treasure room to a strong room where hired guards watched over valuables. Keeping assets safe was the principal cause.
But the person who came up with the idea of a bank loan – or a bank that loans out money to people for an interest charge, can be credited with the most important inventions of all time.
Today, banks have been synonymous with bank loans. Nearly every individual who has a bank account has a bank loan of some sort. And living up to this reputation, the modern day banks offer loans for every imaginable need or requirement.
The practice of charging interest is what makes banks work. A lot of people’s first encounter with a bank is with a savings deposit book; their second is with a some sort of loan, and this proves to be the tie that binds.
In fact, my first loan was for the purchase of my first new car. After this, I took a home mortgage loan to purchase a condo.
These are two worthy topics for taking out loans; nobody has the cash lying around to pay for either a college education or a home full stop from cash on their person.
A typical bank loan for a home runs 15 to 30 years, and most people will end up accruing equity in a home, paying interest on it, and otherwise, becoming home owners in fee simple.
Other bank loans are issued for various reasons, from personal loans to buy items that matter to you, all the way to lines of credit tied to an asset. Personal loans are usually used for things like marriages, emergencies, and major repaired. Secured loans are usually tied to improving the value of the asset that’s securing the loan.
And then of course, there are student bank loans. There are bank loans that will help you buy a car. And again, there are bank loans that will help you buy computers, washing machines and other consumer goods.
Broadly speaking, even credit cards are a form of a bank loan that you can repay. And some banks even offer you loans to pay up other loans you may have taken in the past!
All of these consumer bank loans, mortgages included, are nothing compared to the banking transactions build on inter-business lending.
To give a sense of perspective, the total business loans issued are 99.99% of all the debt issued in the world. And are one reason why the financial bailout of the investment banks was such a high priority to Congress.
One could go so far as to say that without bank loans, the vast majority of business worldwide would collapse. Small wonder then that banking, and by association investment, lending, finance and credit are the words that drive business in the modern day.
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