Question

Definition of the law of credit

Answer 1

Credit - The term credit has various applications to transactions that involve borrowing. Credit can be used in reference to the ability to postpone payment, as in the case of an individual who has credited with a local store that allows the purchase of items on a weekly basis and settlement of account due once a month. An individual might also be extended a credit line, the maximum amount of money that a lender will put at a borrower's disposal. In such a case, an individual enters into an agreement for the taking out of a series of loans. Since there is a fixed limitation on the amount to be borrowed, payments must be made to reduce the debt incurred when the maximum is reached.

Law - Law commonly refers to a system of rules created and enforced through social or governmental institutions to regulate behavior, with its precise definition a matter of longstanding debate. It has been variously described as a science and the art of justice. State-enforced laws can be made by a group legislature or by a single legislator, resulting in statutes; by the executive through decrees and regulations; or established by judges through precedent, usually in common law jurisdictions. Private individuals may create legally binding contracts, including arbitration agreements that adopt alternative ways of resolving disputes to standard court litigation. The creation of laws themselves may be influenced by a constitution, written or tacit, and the rights encoded therein. The law shapes politics, economics, history and society in various ways and serves as a mediator of relations between people.

The Law of Credit

Traditionally, the law has sought to protect borrowers since they are easily exploitable by lenders. Often the two parties do not have equal bargaining opportunities to negotiate all the terms of the agreement, and, therefore, the stronger is able to take advantage of the more vulnerable. The established legal viewpoint is that a lender can properly charge a fee for use of the funds he or she lends, but the rate of interest should be neither unfair nor unconcealable. Traditionally meant charging interest or a fee in exchange for a loan, but it has come to mean charging an illegal rate of interest. Certain credit transactions, such as the loan of money pursuant to a mortgage, are exempt from the provisions of usury statutes.