Credit is generally defined as a contract agreement in which a borrower receives a sum of money or

something of value and repays the lender at a later date, generally with interest.
Source of credit

Individual Money Lenders - individual money lender who may lend his surplus to those in need so that it will bring some
income to him.

Retail Store- Easily the biggest source of merchandise credit in the Philippines is the retail store, more particularly
known as the “sari-sari” store.

Commercial Banks – Commercial banks are engaged in the grant of loans not only to businessmen, but also to
individuals for personal purposes.

Savings Bank - savings banks accumulate the small savings of depositors, such accumulated funds are in turn invested in
bonds or in loans secured by bonds, real estate mortgages, and other forms of security.

Rural Banks - rural banks provide the chief source of credit especially for those engaged in agriculture who need these
facilities badly

Characteristics of credit

It is a bi-partite or a two- party contract- two parties are involve in the agreement: the debtor and the creditor.

It is elastic- it can be increased or decreased by the creditor. Loan limit or elasticity depends upon capacity the debtor
appraised value of his collateral.

The presence of trust in Faith- the basic elements of credit is the creditor’s reliance on both the debtor’s ability and
willingness to pay the debt.

It involve futurity – maturity date for settlement of obligation is a future time. The creditor vest his trust on debtor’s
ability and willingness to fulfill obligation when it falls due.

Elements of credit

It is the ability to obtain a thing of value- in exchange for a promise to pay with money or something equally
satisfactory to the seller at some future time.
A promise to pay- agreement is a promissory note. It details the amount of debt outstanding, the conditions
under which the money will be repaid, the interest rate, and what will happen if the money is not repaid in a
timely manner.
The debtor makes a promise to pay the creditor.
Definite sum of money- credit involve exact amount of money loaned, or money value for non-cash form
credit.
Payable on demand or future time- a promise by the debtor for settlement of obligation may involve a future
date as loan maturity.
Promissory note is a financial instrument that contains a written promise by one party (the note's issuer or
maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified
future date.