A Brief History of Loans
No one can say for certain where the history of loans began… it’s likely that people have been practicing lending and borrowing for as long as there has been a concept of ownership.
The history of loans can be documented at least several thousand years back; forms of lending were evident in ancient Greek and Roman times, and monetary loans were even mentioned in the Christian bible.
The modern history of loans started much later than these ancient times, of course… it is, however, important to realize that lending started much earlier than many people would imagine and has its origin in much older times.
One of the early forms of lending that should be explored in the history of loans is the indentured loan (also known as indentured servitude.) Initially practiced in the Middle Ages and through the 19th century by land owners and the wealthy, indentured servitude allowed poor individuals to borrow the money needed for major expenses such as travel and real estate.
Once the land owner or wealthy individual had secured a ship passage or piece of real estate for an individual, that individual would then have to work off their debt over the course of several years… unfortunately, many times the land owner was very dishonest and would greatly inflate the debt or would continue to add provisions to the debt long after it had been repaid.
Indentured servants often had very few rights, and were seen by some wealthy individuals as a way to maintain slave labor long after slavery had been abolished in both Europe and the United States.
Luckily, legitimate banks were developing even as indentured servitude was rampant. Individuals known as moneylenders played an important part in the history of loans… in fact, it’s from the Italian moneylenders of the Middle Ages that we get both the English words “bank” and “bankrupt” that we use today.
Italian moneylenders would set up benches in the local marketplace (with the word for bench being “banca”, from which we eventually derived the word “bank”). The moneylenders would charge interest on their loans at a rate that they set, and would sometimes be quite successful and become very wealthy.
As an interesting sidenote to the history of loans, if the moneylenders were not successful, though, they would break up their benches and pursue other venues. The Latin expression for breaking up a bench in this way was “banca rupta”, which eventually became the English word “bankrupt” (which carries a much steeper connotation than simply a broken bench.)
Modern banking loans
Of course, the history of loans has progressed quite a bit since the days of the Middle Ages moneylender. Interest rates are much more controlled, loan terms have a much higher degree of fairness to them, and the banks of our era aren’t out to simply get as much money out of borrowers as they can.
The modern banks, finance companies, and online lenders that provide loans to the public and private sectors provide a great service to the world economy, and are regulated by both local and governmental policy so as to make sure that nothing interferes with that service.
However, if not for some of the oppression and misdealing that was present throughout the history of lending then the fairness and opportunity that exists in banking today might not be possible… even the oppression that resulted from indentured servitude in the past helped to establish modern banking by showing what factors needed to be eliminated so as best to benefit both lender and borrower.
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