What is Bank Credit?
Bank credit has to do with the amount of funds that an individual or a business may be able to borrow from one or more lending institutions. In effect, bank credit is a measure of how much in the way of cash loans may be issued, based on the credit history and the assets of the company or person. Here is some information about how bank credit works, and why knowing your bank credit rating may be very important. Because bank credit focuses on the borrowing capacity of the individual or business entity, the premise is a little different than the extension of a line of credit. First, bank credit has to do with loans that are taken out for specific purposes, rather than general purposes. Second, they often involve some sort of collateral that helps to ensure the repayment of the loan in the event of default. A basic philosophy of the banking system is that when money is loaned out, there must be a reasonable expectation of repayment of the loan, plus interest. This means that looking at th
