If you’ve ever wanted to borrow money over the internet, you’ve certainly come across two concepts related to it: credit and loan. They are often used interchangeably as synonyms. It turns out that the two ways to raise cash are quite different. Credit and loan – although there are many differences, we will also find many similarities. Formally, however, these are two different concepts and are subject to different laws.
What is a bank loan?
Simply put, a bank loan is the transfer of a certain amount of money to us by a bank for the time set out in the loan agreement. All issues regarding the cost of the loan (interest, commission) are contained in such a contract. There should also be provisions regarding the terms of resigning from the loan, all penalties for failing to repay payments, etc. A bank loan may be granted only after a positive assessment of the creditworthiness. The maximum amount of credit we can receive depends on it. The amount for which you are applying is not important here. The bank will only offer us the repayment amount that our creditworthiness allows.
As for the loan, it is a much broader concept. A loan can be given to us by a natural person. This is not a concept reserved only for banks or financial institutions. In the case of loans, by definition, we do not need to specify the purpose for which we need to get into debt. In the case of loans, sometimes we have to state what we intend to spend the borrowed money on, although not always. All rules regarding the method of repayment of the loan are regulated in the loan agreement. They are set between the lender and the borrower and the assumptions are not too restrictive.
Credit and loan – What is the difference?
The basic difference between a loan and a loan is the law that regulates these two financial products. All issues related to credit are regulated August 29, 1997. According to its provisions, the form of the loan is reserved only for banks and no other institution or enterprise may grant them. As for the loan, all legal issues are regulated by the Civil Code. The lender can be both a legal person and a natural person. It is also remarkable that the funds intended for the payment of a loan are not the property of the bank but of the entities that have deposited their funds in the bank accounts. In the case of loans, all disbursed funds are the property of the company or lender. It is also worth noting that in the case of smaller loan amounts, no written agreement will be required, which is necessary in each case for the loan.
How to choose the best offer on the market?
Choosing the most suitable offer on the market is not as easy as it may seem. The Internet is saturated with various offers. All of them are described as promotional and the best. To have an overview of all offers, it’s worth visiting one of the loan comparison websites. They apply to both bank loans and loans. We will also find special comparison and mortgage rankings.
The principle of each of them is the same. In their database they have information on the current offer of all banks that have agreed to provide such information. After entering the amount of interest in the appropriate form, we will receive calculations regarding the cost of each loan and installment amount. The repayment period can be freely modified, thanks to which we have a perfect view on how the total cost of the loan increases rapidly and the amount of the monthly installment decreases as the repayment period is extended.
When we receive the relevant calculations, we should first compare the APRC values in all offers. This is the most reliable method of comparing loans and advances. Although the first time we look at the installment amount, we must be aware that the lower the installment we pay, extending the repayment period, the more interest we will pay in the end. Comparing the APRC value, we can easily notice that in the case of bank loans you can easily come across promotional offers at 10%. In the case of loan companies, it can even be several hundred or several thousand percent. At first glance you can see which option pays off more.
Credit or loan?
Everything really depends on our creditworthiness. If you have it, it’s worth using the bank’s offer and taking a cash loan. Although the whole process may take a little longer but we save a lot. In extreme cases, when we do not have adequate creditworthiness, or when we need money “for” we can use the offer of a loan company.