Credit is the trust that one party places in another by lending money or goods. Credit has existed since ancient times and plays an important role in the economy and people’s lives.
Let’s take a look at how credit has changed in different historical eras and how loans, one of the most popular types of credit today, came to be.
Ancient world: temples, laws and debt pits
The first loans appeared in the distant times of Assyria, Babylon and Ancient Egypt. There lived people who could lend money and people who asked for it. Borrowers pledged their property or slaves, and lenders charged high interest for their favor. The risk of losing everything was high: if the debt was not repaid, the lender could sell the borrower into slavery or take his family.
In antiquity, money and valuables were kept in temples, which also gave loans to the needy. But there was no mercy there either: one had to pay for non-payment with freedom. The ancient Romans invented the debt pit, a dark place where debtors and creditors met. There the borrower became a slave of the one to whom he owed and lost all his rights.
The Middle Ages: The Church, Changers and Bills of Exchange
The medieval church condemned any attempt to profit from money, calling it sinful usury. This created serious problems for those who dealt in currency exchange and loans. Such people were called money changers or bankers, and they were often persecuted, abused, and banished from cities.
But clever and cunning moneychangers found a way around the Church’s prohibition by using special documents – promissory notes. A bill of exchange was a kind of check that guaranteed that one party would pay the other a certain amount of money within a certain period of time. Bills of exchange were convenient for trade between different regions and countries. They also provided an opportunity to earn on the difference in exchange rates, which was in fact the same interest.
The Renaissance: banks, loans and laws
With the appearance of the first commercial banks in Europe in the 16th century, lending became legally recognized and widespread. Banks lent money not only to entrepreneurs and artisans, but also to monarchs and nobles. Banks also issued their own coins and paper bills.
Loans played an important role in financing different areas of life: from military campaigns to architectural masterpieces, from scientific discoveries to works of art. But borrowing also carried risks and dangers. Some rulers abused their position and failed to repay their debts, leading to strained relations with banks and popular discontent.
Modernity: industry, consumption and innovation
The history of credit in the modern world begins with the Industrial Revolution, when usurers gave way to commercial banks. Banks expanded the range of credit services, offering not only the financing of production, but also consumption. This is how mortgages, car loans, student loans, credit cards and other types of loans appeared.
Consumer credit was made possible by mass production and entered everyday life in the new Russia after the collapse of the communist system. Loans gave people a chance to improve their standard of living and realize their dreams and plans. But loans also had their downside: high interest rates, debt trap, loss of property or job.
Conclusion
Lending is constantly evolving and introducing new technologies. Online banks, microfinance organizations, crowdfunding and crowdfunding platforms are emerging. Loans are becoming more accessible, convenient and fast. But at the same time, responsibility for one’s financial decisions is also increasing.
Credit is not only about money, but also about trust. Trust between lender and borrower, between bank and customer, between the state and the people. Credit is a tool that can help or hurt, depending on how it is used. Therefore, it is important to know the history of credit in order to understand its essence and price.
