When you borrow money from a bank or other financial institution, it is called a loan. Such loans are issued with specific payment schedules. And upon expiration of the loan agreement, it is necessary to fully repay the entire amount, including interest on the loan rate.
Loan history
Already in ancient times (more than 3000 years ago), people realized how useful and convenient lending can be. Money could be borrowed at interest in Ancient Egypt, Babylon and Assyria. Moreover, lending conditions were very harsh several thousand years ago. The borrower, who failed to pay off the loan on time, became the slave of his creditor. In those days, loans were taken mainly for survival purposes. For example, so that the peasant has the opportunity to buy grain and provide his family with food. Or they were loans for some other personal vital needs.
In ancient times, the history of credit has changed a bit. During this period of human civilization, temples became the main creditors, acting as reserve funds in case of a crop failure. In ancient Rome, there was also a practice of lending, which was called a debt hole. If the borrower could not pay off his debts, he was put in a hole for a month. In the event that relatives did not come and did not pay off the loan for him during this month, the borrower became the lender's slave for three years. In the same era, loans were increasingly taken not only for personal needs, but also to financially support trade.
In the Middle Ages, church authorities actively opposed loans, considering them a sinful practice. In 1179, Pope Alexander III even introduced a ban on issuing loans at interest. If this prohibition was violated, they could be excommunicated from the church, which at that time was a very serious punishment. And in 1274, Pope Gregory X completely decided to expel all those who violated the ban on lending from the state. But nothing came of these restrictions, since bills of exchange began to be used instead of standard loans. As a result, profits began to be received by trading securities, and not by providing money. Starting from the XIV century, bills of exchange continued to be used in European states for more than one century.
The first commercial banks appeared in Europe in the 16th century. By that time, the influence of the church on the state was no longer so strong, which means that nothing prevented the emergence of financial organizations that issue loans at interest. The authorities did not try to ban the practice of lending, but tried to regulate this system by setting the maximum allowable interest rate. And gradually the rate became lower and lower. Initially, it was set at 10% per year, then it dropped to 6%. And this happened in all European countries. This was done more in the interests of the nobility, it was their representatives who often began to take loans in order to purchase luxury items or start some kind of internecine military conflict.
During the industrial revolution, lending became as similar as possible to modern lending. Instead of usurers, full-fledged commercial banks with a network of branches appeared. And at the end of World War II, consumer lending began to develop actively, as banks began to develop the private loan market.
Interesting facts
- The first credit law was passed by the Babylonian king Hammurabi. According to this decree, it was possible to take interest from the borrower no more than a third of the loan amount. If the lender violated this rule, he could be required to repay the entire debt to the borrower.
- The famous writer Alexandre Dumas, who is the author of The Three Musketeers and a number of other books, once received the nickname "the eternal debtor". In 1852, the court of Paris accepted claims from 53 creditors, the total amount of the debt was 107 thousand francs. However, the writer himself did not care much, he managed to escape to Brussels.
- It was the practice of the Kwakiutl Indians to pledge their own name. And until the loan has been repaid, no one should address the borrower by name.
- In Italy, there is a bank that issues loans secured by parmesan. Considering that over time this cheese only becomes more expensive, such a pledge is quite beneficial for the bank.
- The first advertisement for consumer credit was invented by the American Christophe Thornton in 1730. He sold furniture and touted the possibility for customers to pay once a week after purchase, rather than all at once.
In the modern world, loans are the backbone of the economy. Buying a house and a car, paying for tuition and many other consumer expenses are carried out through obtaining loans at interest. And in business and production, it is impossible to achieve dynamic development of the company without loans. Therefore, there are loans in the present and will be in the future, without them the world economy will no longer be able to survive.
