Every day, we often use the terms credit and loan interchangeably. We don’t realize how many differences there are between these two ways of borrowing money. They function completely differently, and differences between them can be found in virtually every aspect. Find out how a loan differs from a loan and which one best suits your financial needs.
Who can grant a loan?
redit is a much more formal way of borrowing money. The basic difference to the loan is the well-defined right to grant it. It is only available to banks and cooperative savings and credit unions. Such laws do not have so-called pair of banks. This is due to the method of legal regulation of loans. They are subject to the provisions of the banking law, not the Civil Code.
Who does the loan money belong to?
The limitation of the rights to credit to banks results in the fact that the borrower does not receive money for ownership. The funds that the bank lends during the loan are also not its property. They are the deposit entrusted to him by clients. In other words, when we receive a loan, we trade the funds of other bank customers.
Credit – never in cash
Importantly, although under the loan we receive funds from the bank for use, we will never get money in cash. The loan consists only of a kind of saving the appropriate amount on the borrower’s account. It is not possible for us to get a loan straight away. When we withdraw money from an ATM using a credit card, we actually make a loan, not a loan.
Credit history and creditworthiness
Therefore, granting a loan is much more formal than granting a loan. Banks want to know exactly the financial situation of the client applying for a loan. They check his source of income to make sure he is a solvent person and will not lose money on credit. In addition to creditworthiness, the customer’s credit history is also examined, i.e. a list of existing loans. Credit credibility is usually determined by means of points, this procedure is called scoring.
Loan, when big expenses await us
After checking the creditworthiness, it does not always turn out that the applicant receives the amount for which he applied – the bank may grant a lower loan or not grant it at all. In general, loans are also different from loans, of course, in amount. Loans are granted for much larger sums, thanks to which the borrower can, for example, buy a flat or a car.
Every loan has a purpose
Another important difference between a loan and a loan is that the goal of the client applying for a loan must always be presented to the bank. Also under the influence of this information, the bank decides to grant a loan. During the loan period, the bank monitors how the customer uses the funds entrusted. If it finds that it seems to be inconsistent with its declared purpose, it may request its immediate return.
There is no credit without a contract
The customer is obliged to declare the purpose in the loan agreement, which is a necessary condition for taking out the loan. The agreement contains a clearly defined amount of the loan, the date of repayment of the incurred money and the amount of interest that must be repaid within a strictly defined period. The bank also adds a commission, i.e. an additional fee for granting the loan.
Who can grant a loan?
And what about the loans? Unlike loans, they are not so formal. In fact, anyone can grant a loan – both an institution and a natural person. We can get a loan both from the bank and a relative. For this reason, the manner of granting loans is regulated by the provisions of the Civil Code, not by banking law. It should be remembered, however, that banks can grant both loans and borrowings, therefore when going to the bank for money we have to think about which option will be better for us.
Quick loans and money on property
A loan is distinguished from a loan by the fact that the money borrowed becomes our property. In the case of a loan, the funds must also belong to the lender. A characteristic feature of the loan is also that it is usually granted in cash. We also receive it immediately. The fastest form of quick loans are online loans granted on the internet – a few clicks separate us from getting the money we need.
The loan does not require formalities
The granting of loans is therefore accompanied by a minimum of formalities. The lender is not interested in our financial situation, creditworthiness or credit history. We also do not have to declare the purpose for which we will devote the borrowed money. We can issue them in any way. Therefore, the lender cannot demand an immediate refund if we spend it contrary to his expectations, because we do not specify the exact purpose of the loan.
When and how to pay back the loan?
Sometimes, the loan repayment date is not strictly defined either. This particularly applies to the least formal, contracted between friends. Loan companies or a pair of banks usually specify the loan repayment date, or interest rate. Often, the loans are not interest-bearing – in other words, we give back exactly as much as we have obtained. Loans are usually not accompanied by a commission for the borrower.
The loan will be carried out without a contract
A minimum of formalities also means that a contract is not necessary to grant the loan. An oral agreement is enough. Although for loans over PLN 500 it is recommended to formulate a contract for evidentiary purposes, but it is not necessary for the loan to be valid. The lack of the need for a contract results from the small amounts that usually apply to loans – they reach no more than several thousand USD.
So what should you choose – a loan or a loan?
The answer to this question obviously depends on how much money we need and for what purpose. If you expect a major expense of more than a few thousand USD, such as buying your own M or car, then the loan will work better. It requires much more formalities, but also the entire procedure of its receipt and repayment is strictly specified in the contract. A loan will be a better option if you urgently need a relatively small amount.
When we need some home appliances, want to carry out renovation or go on vacation, then it is worth thinking about a loan. There are many loan offers on the market – the loan terms of the most important lenders can be checked using the loan rankings at instant-.pl. It is also worth checking the cash loan ranking for 2016 to see which one is the most advantageous.