Credit loans are a complex issue that should not be used for political gain. While candidates may promise easier credit for youth, looser policies could have unintended consequences. Credit allows borrowing now in exchange for future repayment with interest. Interest rates depend on borrower risk, regulations, market competition, and a bank's costs. Politicians should focus on long-term reforms like increasing investment and competition that incentivize affordable credit instead of short-sighted promises.

1. CREDIT LOANS FOR THE YOUTH:
NOT A POLITICAL PLAY!
August 15th, 2013
One of many promises of running presidential candidates is to ease credit facilities for the growing
young population.
In this issue of our weekly newsletter we story-tell you why credit is so important and complex that
political candidates should not use as electoral promises.
WHAT ARE CREDIT LOANS? LET’S SEE SOME CONCEPTS...
Credit: A contractual agreement in
which a borrower receives something of value now and agrees
to repay the lender later in the future, generally with interest.
Interest: The amount charged, expressed as a percentage
of principal borrowed amount, by
a lender to a borrower for its use.
Regulation: The
“SuperIntendencia del Sistema Financiero” is the government entity responsible to regulate financial
institutions duly authorized to extend credit and loans, to protect
and prevent fraud.
Financial Institutions: Include
Commercial Banks, Estate Banks,
Community Banks, and Thrifts.
Reason to carry credit – Types
To start your company and transform your ideas into
profit
To buy a piece of land for a house, a house or repairing
an existing one,
To pay your tuition, acquiring goods or services and other debt obligations.
THE COST OF A CREDIT –INTERESTS AND CHARGES
An interest rate, charged by a financial institution, may depend on:
-The borrower’s credit risk profile (their income, their credit history and the probability that the borrower loses his paying capacities),
-Governing laws and regulations, established by laws, the Central Bank, the
Bank Law and the Financial System Regulator (Superintendencia del Sistema Financiero),
-The industry’s competitive landscape,
-financial institution management and internal conditions such as number of
clients.
Besides interest rates, financial institutions also charge administrative fees.
IN CONCLUSION...
Beware: Promising to ease credit conditions and to lower interest rates to the younger population is a politicians' populism.
If a political candidate were to improve and promote looser credit conditions, he or she should
incentive domestic and foreign investment in the financial system, by favoring a competitive market place and eliminating industry restrictions that snowball into higher costs and tighter credit.
As a young responsible citizen financial decisions are key for your future.
Take action and raise your hand to call-on politicians using this populist speech!