Banking Active Operations and Personal Loans Explained

Active Banking Operations

These operations involve banks lending resources to their clients. Clients undertake to return these resources plus the interest generated within the allotted time. These operations are reflected in a contract and supported by real or personal guarantees.

Common Active Operations

• Commercial bill discounting operations
• Loans
• Credits
• Bank guarantees

From a financial standpoint, active operations of credit institutions are classified into:

Classification by Term

• Short-term operations: Such as discounting operations, policy loans, etc. These are usually calculated using simple interest.
• Long-term operations: Such as loans in general. These are calculated using compound interest.

Personal Loans

These are granted after assessing the economic strength of the customer and/or the creditworthiness of other persons who act as guarantors or sureties for the operation. Guarantors or sureties are obligated to repay the loan if the borrower fails to do so. This situation is known as liability.

Banks follow rules of action when granting personal loans to avoid exceeding a rational risk in banking practice. The most important rules are:

Rules for Granting Personal Loans

• Check the income of applicants and their commitments to current and future payments.
• Analyze the history of the applicant if a client of the entity.
• Collect appropriate reports on employment history, company stability, and future prospects.
• Establish a logical correlation between the amount of the loan and repayment terms.
• Determine the assets of the applicant and the people involved as guarantors in the personal loan operation.

The personal loan is formalized in a loan policy, which is the contract, formalized through a public document, in which the parties undertake to comply with the general and specific conditions of the operation. At the time of signing the contract, a notary is involved, who attests to the operation and formalizes the policy as a public document.

Typical costs banks charge customers for granting and finalizing a personal loan include:

Typical Personal Loan Costs

• Opening commission: 1% to 2% of the loan amount.
• Processing commission: about 0.5% of the loan amount.
• Notary fees: operating expenses of the notary, typically 0.3% of the loan amount.
• Term life insurance (often required).
• Early repayment commission: Applied in cases of early repayment of the loan.

Lending policies determine the specific commission rates, with the early repayment commission commonly around 1% of the amount repaid early.