Loan interest

Loan interest

The cost of a service provided by a lender to a borrower (client), consisting of providing him with a certain amount of money for a specified period for a fee. Its value is determined by the interest rate. Loan interest is measured as a percentage in the form of a decimal or natural fraction. Interest is usually calculated discretely (at the end of a certain period - month, quarter, year). They are paid as they accrue or are added to the amount of debt.

the price of credit funds in the loan capital market for their consumer properties - to bring income (profit) to the loan user (borrower).

Terminological dictionary of banking and financial terms. 2011 .

See what “Loan interest” is in other dictionaries:

- (rate of interest) See: interest. Business. Dictionary. M.: INFRA M, Ves Mir Publishing House. Graham Betts, Barry Brindley, S. Williams and others. General editor: Ph.D. Osadchaya I.M.. 1998. Loan Interest... Dictionary of business terms

The interest paid on a loan obtained against real investments... Glossary of crisis management terms

A fee paid by a borrower to a lender for using a loan. Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B.. Modern economic dictionary. 2nd ed., rev. M.: INFRA M. 479 p.. 1999 ... Economic dictionary

Loan interest- payment received by the lender from the borrower for the use of loaned money or material assets. Loan interest is one of the forms of surplus value. The banker provides his money capital for temporary use... ... Dictionary of Economic Theory

Loan interest- see Loan interest... Librarian's terminological dictionary on socio-economic topics

LOAN INTEREST- (English loan interest) – a kind of price of the value lent for temporary use. One of the tools for monetary regulation and bank liquidity management. S.p. classified: by forms of credit, types of credit institutions, types... ... Financial and credit encyclopedic dictionary

LOAN INTEREST- – price of loan capital. Payment for the use of loan capital is expressed through the interest rate, which is measured by the ratio of the annual income received on loan capital (for example, 20 thousand dollars) to the total loan capital (for example, ... ... Economics from A to Z: Thematic Guide

See Percentage... Great Soviet Encyclopedia

Payment made by a borrower to a lender for using a loan... Encyclopedic Dictionary of Economics and Law

- ... Wikipedia

Books

• Money, credit, banks. Textbook and workshop for academic bachelor's degree, Kropin Yu.A.. The textbook offered to the reader's attention is distinguished by a fundamentally new look at the essence and properties of money, the law of monetary circulation, the source of the increase of money, loan interest, ...

Loan interest represents a reward for the use of borrowed monetary resources (otherwise called loan capital or credit) for a limited amount of time. In other words, it is the interest rate that reflects the cost of borrowed money and actually shows the price of the loan. Loan interest is calculated using the formula indicated in the figure on the right.

The economic category under consideration occurs in the case when some owner of free financial resources transfers them to another person for some time for the purpose of useful consumption. That is, the borrower, as it were, buys the utility of the provided capital, which is expressed in the possibility of generating profit from this money, while the loan interest is the price of these resources paid by the borrower to the owner of the loan capital.

The source of payment of loan interest is the added value that arises at the time of effective use of the loan provided. The loan is exploited as capital, which is invested in production, so the level of payment for the loan cannot be higher than the rate of profit generated as a result of using the loan (otherwise the loan is not used rationally).

What determines the interest rate?

Like the cost of any product, the price of a loan tends to change its value, so the loan interest may vary over different periods depending on the supply and demand for credit resources. The relationship between supply and demand is determined by the following factors:

Yandex.Direct

The amount of cash accumulations and savings that are sources of credit opportunities - the larger this indicator, the lower the loan interest (since the supply is large).

Cyclical production. At some times the demand for investment increases (for example, during economic expansion), and at other times it decreases. Thus, the higher the investment demand, the higher the interest rate.

Government regulation of the money supply in circulation - the more money in circulation in the system, the higher interest rates.

Inflation rates. As inflation processes intensify, interest rates increase, and a distinction is made between nominal and real rates. Real % is calculated as nominal % minus the average annual depreciation of money. In the case when the inflation rate exceeds the rate increase, the loan interest becomes negative, i.e. is actually charged to the lender rather than the borrower.

Exchange rate fluctuations - the higher the foreign currency exchange rate, the lower the interest rate, and vice versa.

International capital flows, etc.

Thus, the dynamics of the interest rate is mainly determined by the market mechanism, but largely depends on government regulation.

Loan interest is an objective economic category, which represents a kind of price of value lent for temporary use.

Loan interest arises where an individual owner transfers to another a certain value for temporary use for the purpose of its productive consumption. This value has the characteristics of a product.

If we recall the formula of commodity-money circulation and taking into account that the function of a commodity in a loan is performed by money, the formula for the movement of the value lent takes the form:

D-D", i.e. D"-D=?D,

where D - loanable value;

D" - the accumulated amount of debt;

D - increment to the loan, acting as a payment for the loan.

For the lender, the purpose of the transaction is to obtain a certain income on the loaned value; the entrepreneur also raises funds in order to increase profits. The entrepreneur pays interest from the profit to the lender, part of this profit appears in the form of loan interest.

Loan interest is inextricably linked with the concept of loan capital.

Loan capital is the owner's funds, which are lent in order to receive profit in the form of monetary interest, subject to the repayment of the initial capital.

The first and main source of the formation of loan capital is the part of the funds released in the process of reproduction, which accumulates monetary capital. The process of releasing funds from the production process occurs due to:

• - depreciation of fixed assets;
• - the difference in monetary capital between the cost of goods released in the process of selling products and, over time, the creation of new material costs for the purchase of raw materials and wages;
• - surplus value arising as a result of production activities.

The second source of the formation of loan capital is the capital of rentiers (money capitalists - entrepreneurs who make a profit from lending operations.

The third source of loan capital formation is the association of other creditors who invest their income and savings in credit institutions. These include insurance companies, a pension fund, temporarily free funds from the state budget, savings and income of various classes and other institutions.

There are various forms of loan interest, their classification is determined by a number of characteristics, including: forms of credit; types of credit institutions; types of investments involving credit; loan terms; types of operations of a credit institution.

So, according to the forms of credit, there are such forms of loan interest as commercial interest, bank interest, consumer interest, interest on leasing transactions, interest on government loans.

Based on the types of credit institutions, we can say that there are such forms of loan interest as the discount interest of the Central Bank of the Russian Federation, bank interest, and interest on pawnshop operations.

By type of investment using a bank loan, they distinguish: interest on loans for working capital, interest on investments in fixed assets, interest on investments in securities.

According to the loan terms, interest rates on short-term, medium-term and long-term loans differ.

By type of operations of a credit institution, the following forms are distinguished: deposit interest, bill interest, bank discount interest, interest on loans, interest on interbank loans.

Loan interest in all its forms is characterized by the following mechanism of use. The level of loan interest is determined by macroeconomic factors: the ratio of demand and supply of funds, the degree of profitability in other segments of the financial market, the regulatory direction of the interest rate policy of the Central Bank of the Russian Federation, and also depends on the specific terms of transactions for both attracting and placing funds.

Loan interest owes its origin to the movement of the value being lent, which has the characteristics of a commodity. This movement characterizes credit relations. Although interest is not a mandatory attribute of a loan, it does not function outside of credit relations; moreover, it acts as a moving motive for their development.

The interest reflects the economic relations arising on the basis of the loan. Their subjects are the lender and the borrower (borrower) or, respectively, the recipient and the payer of interest. The relationship between the lender and the borrower, fixed by the category of interest, is stable and is constantly reproduced, since it realizes the interests of the participants in the credit transaction. Although the interests of the parties are opposed to each other, they can only be realized through each other. The effect of using a loan becomes a condition for payment of loans provided by the lender and allows you to realize the interest of the borrower with the amount of funds remaining after paying interest. The object of relations regarding interest can only be income received from the use of a loan. The relationship will not work out if one party does not receive part of the income in the form of loan interest, and the other party does not satisfy its interests in receiving income through the loan. The conflict of interests of participants in a credit transaction leads to the division of profits on invested funds between the lender and the borrower, and these shares are not always equal. However, if we proceed from the principle of equal income on invested funds, then for one ruble of borrowed funds there is an amount of profit corresponding to the return on one’s own investments.

Relations regarding interest differ from relations regarding a loan: if a loan involves the movement of value from the lender to the borrower on the basis of repayment, then the payment of interest by the borrower characterizes the transfer of a certain part of the value without receiving an equivalent. The payment of interest characterizes the movement of value in one direction, towards the creditor, its amount is completely transferred to the subject - the recipient of the interest amount. The right of ownership of the interest amount passes from the borrower to the lender, while with a loan the ownership right is not ceded, the loaned value (loan) is transferred to the borrower for temporary use, and after a certain period everything returns to the starting point. A loan is characterized by an advance of funds, while the payment of interest means the completion of the value circuit. In relations regarding credit and interest, the movement of value begins in different ways: with the value being lent, from the lender to the borrower; when paying interest - in the opposite direction, from the borrower to the lender. The difference also lies in the qualitatively different size of the moving value. If a loan at its final stage is a return of value in its full amount provided, then interest is a movement in the form of a special increment to the loan.

Interest as an economic category has its own sphere of functioning and influence. First of all, it performs a redistributive function - it redistributes part of the income between business entities, between owners in favor of one or the other. Being a taxpayer, the creditor, through payments to the budget, redistributes part of the funds at the disposal of the state.

Through loan interest levels, the ratio of demand and supply of credit is balanced, and a rational combination of own and borrowed funds is established. This is achieved when the loan interest performs a regulatory function. Regulatory influence on reproduction is achieved through the distribution of loan capital between enterprises and industries. Interest regulates the volume of deposits attracted by the bank and the current liquidity of the bank. Modern economic relations are characterized by the strengthening of the role of interest in the composition of monetary policy instruments.

An important function of interest is the preservation of the loan fund. The initial amount of credit resources is not only preserved, but also increases due to the difference between the interest received by the lender and the interest paid by him. The value returned from the borrower to the lender does not lose its qualities. Preserving its consumer properties thanks to interest, it is ready to enter into a new revolution and, along with other economic instruments, actively influence social development.

The following is characteristic of loan interest in all its types. Payment is usually in cash. The interest level is determined by both macroeconomic factors (the ratio of demand and supply of funds, the degree of profitability in other segments of the financial market, inflation, interest rate policy of the central bank, taxation, etc.) and microeconomic and depends on the specific conditions of transactions to attract or place funds. The procedure for calculating and collecting interest is stipulated in the agreement of the parties. The source of interest payment depends on the nature of the transaction.

Interest rate policy is reflected in the regulation of the system, level, dynamics of interest rates and the establishment of regulatory methods.

Despite all the features, a common basic principle of banks' interest rate policy can be identified - this is the monetary policy of the state and the influence of the central bank on the level of the market price of interest.

The state and the central bank influence the level of rates of commercial banks, using measures of both directive and indirect regulation. The first include limiting the upper level of rates, the difference between interest (margin), establishing an official refinancing rate, discount interest, freezing interest rates, etc.

The most effective instruments of indirect influence are: the level of reserve requirements of the central bank; volume, conditions and price of loans provided to commercial banks; liquidity standards. Factors that indirectly influence the level of rates include the taxation system for banks. Changing tax rates directly affects the level of interest rates: the higher it is, the higher the interest rates for the loan, and vice versa. An increase in the central bank's reserve requirements also leads to an increase in the level of loan rates.

Interest rate policy is one of the rather complex instruments for regulating banking activities, since the interest rate scale and the principles of its construction depend on many factors: the supply and demand of money, the degree of business activity in the country, inflation rates, credit market tensions, sources, volumes, terms of available funds , influence of external factors.

The insufficient development of the credit market in the republic affects the interest rate policy of commercial banks. Interest rates are differentiated depending on the type and size of the bank, clientele, type of transactions and other circumstances of an individual nature.

Thus, court interest is an objective economic category, representing a kind of price of value lent for temporary use.

Introduction3

1. The concept of loan interest5

1.1Loan capital market, supply and demand on it5

1.2 Mechanism for the formation of loan interest

2. The economic essence of loan interest.

2.1 Types of interest rates, nominal and real interest rates.

2.2Factors that determine differences in interest rates.

2.3 Bank interest and interest income.

3.Methods of regulating interest rates by the state and banks.

Literature

Introduction

In any developed market economy, the interest rate in the national currency is one of the most important macroeconomic indicators, which is closely monitored not only by professional financiers, investors and analysts, but also by entrepreneurs and ordinary citizens. The reason for this attention is clear: the interest rate is the most important price in a national economy: it reflects the price of money over time. In addition, the cousin of the interest rate is the inflation rate, also measured in percentage points and recognized, in accordance with the monetarist paradigm, as one of the main guidelines and results of the state of the national economy (the lower the inflation, the better for the economy, and vice versa). The relationship here is simple: the level of the nominal interest rate must be higher than the inflation rate, with both indicators measured as percentages per annum. In modern economic theory, the general term "interest rate" is used in the singular. Here it is considered as an instrument with which the state, represented by the monetary authorities, influences the country’s economic cycle, signaling a change in monetary policy and changing the volume of money supply in circulation. At the private level, in everyday practical life, loan interest permeates the entire economic life of the country, being present in various credit and debt instruments of the state, banks, companies, individual entrepreneurs and individuals in the form of various interest rates.

The variety of specific interest rates in national currency is a topic that is very useful practical knowledge, the accumulation of which in the life of any person occurs empirically. Thanks to the media, either in our professional lives or when managing personal savings and investments, we have all heard or regularly come across different interest rates on a variety of products.

The purpose of this work is to analyze the essence of loan interest. In accordance with the goal, the following tasks were set:

1. Define loan interest and interest rates;

2. Reveal the mechanism for forming loan interest;

3. Consider the forms of loan interest and types of interest rates;

4. Outline the features of the money market in Russia.

When writing the work, the following research methods were used: monographic, statistical, analytical, logical and others.

The information base for writing the work was: educational, scientific, methodological literature on the issue under consideration, legislative acts; statistical reference books, problematic articles in the federal media, remote access electronic resources.

1. The concept of loan interest

1.1 Loan capital market, supply and demand on it

Free money capital, released from some enterprises, corporations and other economic entities and intended for transfer for temporary use to others, becomes loan capital. The movement of loan capital occurs on loan capital market . Money as a credit resource has its price - loan interest .

Loan interest- This is the monetary reward that lenders receive by providing a loan. Loan interest is the price of the loan, or the payment that the borrower of money owes to the lender for using the loan. Loan interest represents income on loan capital, thereby emphasizing the monetary nature of interest.

The existence of loan interest is due to the presence of commodity-money relations, which in turn are determined by property relations. Even in ancient times, two millennia BC, numerous types of natural loans were known with payment of interest in kind - livestock, grain, etc. In terms of issuing cash loans, interest is accordingly paid in cash. Loan interest arises where one owner transfers a certain value to another for temporary use, as a rule, for the purpose of its productive consumption. For the creditor, who refuses the current consumption of material goods, the purpose of the transaction is to obtain income on the loaned value; the entrepreneur also attracts borrowed funds in order to rationalize production, including increasing profits, from which he must pay interest.

During the period of free competition, the main form of movement of loan capital was credit. With the development of the market, expansion of capital volumes, and the emergence of securities, a financial market . In the financial market, market redistribution of free cash capital and savings is carried out between various economic entities through transactions with financial assets. The latter are money in cash and in the form of bank account balances, foreign currency, securities and gold. The supply of funds comes from households; enterprises that generate free funds in the process of circulation of their capital and from the state, from which they appear as a result of the formation and use of centralized monetary funds. The demand for monetary resources is from the real sector of the economy, the state to finance its expenses, as well as households.

Depending on the purposes of redistribution, the financial market is divided into money and capital market . Money market is a market for short-term transactions (no more than one year), in which free cash is redistributed. The characteristic features of the money market include its high liquidity and mobility of funds. It carries out transactions with assets in liquid form, which include money in the form of banknotes and balances in current and correspondent accounts of commercial banks; government short-term securities; short-term commercial debt obligations (bills), which are presented in the form of securities. The money market serves the movement of working capital of enterprises and organizations, short-term liquidity of banks and the state.

There are several segments of the money market. First of all this interbank market , which represents a set of relationships between banks arising regarding mutual short-term unsecured loans. In the interbank market, there is a redistribution of short-term and ultra-short-term banking resources. The money market also includes short-term bank loan markets , where businesses will receive the funds necessary to complete settlements, discount market, market short-term highly liquid and reliable government securities , certificates of deposit .

The main participants in the money market are banks, including the central one, which enters its interbank segment with the supply of money, while implementing their monetary policy. The main function of the money market is to regulate the liquidity of all its participants and the economy as a whole. In the presence of a developed money market, each participant has the opportunity to either place their temporarily free funds in highly liquid and reliable instruments that generate a certain income or, conversely, quickly attract additional liquid funds.

On capital market there is a redistribution of capital and its investment in various profitable financial assets. Long-term transactions are carried out in this market. There is no strict boundary between the money and capital markets, since the same instruments can circulate on both.

Trading for the use of borrowed funds is carried out in various segments of the financial market. Persons wishing to lend money offer them through these markets. Depending on the type of financial instruments that are the object of purchase and sale, four segments of the financial market are distinguished: foreign exchange markets, credit markets, securities markets and gold markets. All segments of the financial market are interconnected, their boundaries intersect, and some financial instruments can be converted into others.

In a perfectly competitive financial market, individual borrowers and individual lenders cannot influence the market interest rate. They accept the existing rules. Each individual borrower represents only a small part of the total supply of loanable funds. And each lender offers a small share of the total demand for borrowed funds. The price paid for the use of borrowed funds is determined by the supply of accumulated funds, determined by the supply of accumulated funds and the demand for borrowed funds on the part of borrowers.

In theory J.M. Keynes interest is an autonomous factor, its level is determined by the interaction of supply and demand for cash balances, i.e. not for all savings, but only for their monetary part. In his opinion, interest is a purely monetary phenomenon, reflecting the play of market forces in the money market. In this direction, he developed his theory of money demand, linking it with the propensity for liquidity . Keynes believed that interest had lost its connection with the nature of loan capital, but had become closely related to the monetary sphere. With the introduction of interest in the analysis of demand for money, the problem of optimizing the distribution of their resources by economic entities between alternative types of assets was posed. The expectations of business agents in conditions of uncertainty and risk begin to play an important role in determining the demand function.

Loan interest is payment for the fact that the owner of capital refuses to use it independently and provides other people with the opportunity for its current, current use. In fact, the size of the loan interest can be called a kind of equilibrium point between the supply of available funds and the demand for these funds.
In simpler terms, loan interest can be called the price that must be paid to the owner of capital for its use. The period of time during which the borrower can use the loan is determined in advance.

Its value can be expressed using the interest rate (loan interest rate) for the year.

In its turn, interest rate is a certain amount of financial resources that must be paid for the use of one borrowed monetary unit during the year. A special formula is used to calculate the rate.

There are two separate types of interest rates: nominal and real.

• By the nominal lending rate, it should be understood that the rate is expressed in monetary units at the current exchange rate without taking into account the rate of inflation. This is a certain amount of financial resources that are paid per unit of borrowed currency for a previously agreed period of time. The nominal rate shows the relationship between the amount that the borrower must return to the lender and the amount that was previously received in the form.

In this case, the calculation is made using the following formula:

S = P (1+ ni), where
S - the amount of loan payments taking into account the initial debt (increased amount of debt);
P—original debt;
n is the duration of the loan in years or the ratio of the period of use of the loan in days to the applicable calculation base (360 or 365 days);
i is the interest rate.

• The real interest rate implies a rate that is expressed in certain monetary units, taking into account the pace of development. The real rate is one of the main factors in the decision-making process in the investment segment.

The interest rate level that takes into account inflation can be calculated in 2 ways:

Those close to you:

i f = i + f ,

where f is in percentage.

- precise:

i f = i + f + i * f / 100

The size of the loan interest depends on many factors - risk, the period for which the loan is provided and its security, the size of the loan provided and income, as well as current competitive conditions.