Passive Credit Is: Definition, Characteristics, Types, and Management

Passive credit is a loan provided by public funds or immovable customers. This type of credit is not the same as active credit, which is usually used for daily needs.

There are several types of passive credit products that you need to know after reading the explanation above. Read a full review of what passive credit is and examples in the following article!

What is Passive Credit?

The term "passive credit" is used to describe the level of payment on a person's loan that has not been paid in full. In other words, it refers to the amount of money still owed to a bank or other financial institution. In this situation, the word "passive" refers to the obligation to repay the loan.

Lenders have "active credit," or income-generating assets, while borrowers have "passive credit."

Passive Credit characteristics

The following are some of the characteristics of passive credit:

1. Payment Obligation: If borrowers have passive credit, they must repay the loan.

2. Interest: Over the term of the loan, passive credit often earns interest.

3. Payment Schedule: The borrower has an obligation to comply with the payment schedule set by passive credit. Repayment: Passive credit ends when the loan is paid off.

Types of Passive Credit

Here, you should know several types of passive loans. At least the four most common types are savings, current accounts, deposits, and deposits on call. For more information, see below.

1. Savings (Savings)

Savings is a type of deposit that can be deposited and withdrawn at any time, unlike Time Deposits. Currently, the bank also offers facilities in the form of ATM machines that are available throughout the day to provide practical and effective services, enabling customers to withdraw money whenever they want.

2. Line of Business

Giro is a customer's deposit of money that can be taken through a Giro slip. In addition, because it has been recognized by the government, it can also be used as a means of payment. An order to return funds between accounts is called a giro.

3. Time deposit

Next, there are Time Deposits. These deposits are the same as regular deposits, only their withdrawal times are different. So, these deposit funds cannot be withdrawn at any time, only according to the applicable provisions.

4. Deposit on call

For Deposit On Call, the minimum disbursement period is 7 days, and no longer than 1 month. These deposits are made on behalf of individuals or groups with a minimum fund of IDR 50.000.000, but these provisions vary from the bank concerned. Then, banks and customers can also negotiate about the amount of interest.

5. Deposit Loans

Next there is loan deposits. Deposit loans are funds lent to a bank other than the customer; These funds are deposited with other banks and can be withdrawn at any time.

6. Certificate of Deposit

Certificates of deposit are the next type of passive loan. Although they look similar at first glance, the basics are different. One form of debt provided by banks to investors is a certificate of deposit. To exchange the money loan for a set period of time, the bank will provide high interest to investors.

7. Automatic Roll Over Deposits

Finally, there is the Auto Rollover Deposit. The purpose of this deposit is to increase the deposit amount overseas. You who live or work abroad will suit this type. This deposit will be automatically extended according to the agreement when it is due.

Passive Credit Management

In terms of passive credit, the important thing to understand and take good care of is credit management. This is the process of managing and managing credit to ensure that we are able to pay off loans on time and avoid financial problems. The following are some suggestions for running passive credit properly:

Understand Terms and Conditions: Before borrowing, make sure we understand interest rates, loan terms, and penalties for not paying.

Payment schedule: Make sure to adhere to the predetermined payment schedule. Late payments can result in additional fees and even damage to our credit reputation in many cases.

Repayment Plan: Make a realistic repayment plan that takes your income and other living expenses and expenses into account.

Credit Diversification: To reduce risk, try credit diversification. Don't rely too much on one type of credit.

Hopefully this article will increase your knowledge about the world of banking, especially regarding passive credit.