Credit Policy - External Tools #2

The most important risk that the interest rate can generate in the policy of external loans is the impact that changes in the inflation rate, as well as the exchange rate, have on it. An effective method to eliminate this risk is to calculate the costs incurred by the loan based on the determination of the present value.



When determining the total cost of a loan, in addition to the interest rate, the associated fees are also taken into account. As for government loans, in most cases, electronic payments are non-use of loans. In recent years, many banks, especially in Southeast Asia, have set the level of this fee by calculating the initial loan term as a percentage of the outstanding amount.



Depending on the repayment period, loans can be: short-term (1-2 years), medium-term (3-5 years) and long-term (more than 5 years).



The beneficiary is interested in ensuring that the repayment period is sufficiently distant to be able to acquire the resources necessary to repay it, as well as to pay interest and other related expenses. When a loan reaches a productive destination, the repayment period must take into account the moment when the relevant goal is put into effect and the net income that can be received from it, knowing the duration of such a goal.



However, if it is a government loan intended to cover government expenditures, it is important that this criterion be analyzed together with the money supply that may be available, as an analogue of the amount of budget revenues that can be used for this purpose, as well as available international resources.



Accordingly, three separate periods are set during the last term: the loan usage period; and a grace period during which no loan repayment payments are made, with payments represented only by interest and the actual loan repayment period. The grace period is variable, not mandatory.



If the loan amount is provided in a lump sum and is repaid in one payment, the recipient of the loan has it for the entire term of the loan. However, if the corresponding amount is received and repaid in a staggered manner, the average loan term will be less than the term for which it was concluded.



The terms of the loan are set in accordance with their purpose, the profitability of the purpose for which the loan was concluded, if it is used for production purposes, the cost of the machines included in the borrowed facility, international practice, the current legislation of the lender's country and, accordingly, in relation to the beneficiary, the provisions of international conventions in the field, etc. https://3winorama.com/