September 17, 2018 Credit and loan differ in many ways. The main difference is that the loan is taken from the bank and the loan from the non-bank institution. What is the difference between a loan and a loan? First of all, the amount, loan period and cost. If you don’t have time to read the entire text, then take a look at the summary at the very end.
Credit and loan – basic differences
The definition of credit and loan are formally different. These concepts are considered to be the same by many consumers. This is probably due to the fact that the essence of both is borrowing money. Both credit and loans consist of transferring a specified amount of money to the client for a specified period of time.
The main difference between a loan and a loan is due to the type of financial institution that grants these obligations. You can only apply for a loan at the bank. It is a traditional and well-known form of financing for larger enterprises. The equivalent of credit is online loans from non-bank loan companies. Another difference is that banks have a statutory order to verify the customer’s creditworthiness at the Credit Information Bureau. On the other hand, non-bank institutions do not have such an obligation, therefore they can grant loans without BIK.
Which solution is chosen more often? A report from the Credit Information Bureau “Credit trends” shows that in 2017 there were 105,000 housing borrowers and 74,000 consumer borrowers. In turn, 101.3 thousand new loan companies increased. new customers. About 80 percent out of 498 thousand borrowers are in the process of paying off bank liabilities.
Bank loans and non-bank loans are becoming increasingly popular. Before signing the contract, it is worth getting to know the basic differences between them, i.e. legal regulations, terms and type of contract, the loan period and the possible amount of the liability and the costs associated with it.
What is a bank loan?
Credit terms are regulated by the Banking Law. As provided for in Article 69 of the Banking Law, “By means of a loan agreement, the bank undertakes to make available to the borrower for the period of time specified in the contract an amount of cash for a specific purpose, and the borrower undertakes to use it under the conditions specified in the contract, to return the amount used loan with interest on specified repayment dates and payment of commission on the loan granted. “
The loan agreement should be in writing. It must specify, among others aspects such as:
- parties to the contract,
- loan amount and currency,
- the purpose for which the money will be allocated (the exception is cash loans),
- rules and repayment deadline,
- interest rate,
- way of securing repayment,
- total cost of the commitment.
The minimum amount of credit that can be obtained depends on the selected offer. The maximum loan amount may be affected mainly by the creditworthiness of the future borrower. The loan may amount to hundreds of thousands of zlotys. With such high liabilities, a security of repayment is required, e.g. in the form of a mortgage, to limit credit risk. In addition, banks require income declarations. The so-called employment contract, however, in some cases credit for a mandate contract is possible.
A bank loan has a long repayment period. It depends on the type of loan, but the longest can reach even 50 years. The bank does not grant a cash loan, but only transfers the amount specified in the contract to the client’s account. In addition, the bank has the right to control how borrowed money is spent.
The cost of the loan consists of:
- amount borrowed
- loan interest rate,
- loan commission,
- loan margin
- administrative fees for preparing the contract.
The cost of both the loan and the loan will help calculate the APRC calculator.
Types of bank loans – what do borrowers choose most often?
Banks are constantly expanding their credit offer. Customers can use credit cards to finance smaller expenses. They allow you to use the bank’s money within the monthly limit granted to us. It is a short-term solution because the debt must be repaid after a maximum of two months.
When financing larger expenses, larger loans tailored to the borrower’s purpose and individual needs may be useful. The most frequently used types of loans are:
- Consumer loan – this is a loan for any purpose not related to business activity, e.g. purchase of a TV set or household appliances. It is incurred for lower amounts. The repayment period can be from several months to several years. This type of liability is secured by the borrower’s income or other people’s sureties.
- Investment loan – intended for the implementation of projects increasing the borrower’s assets, e.g. purchase of shares or long-term securities. It is a commitment for about 8-10 years. The condition for obtaining is the presentation of a business plan.
- Mortgage – granted for the purchase of real estate or construction projects. It is characterized by a high amount and long repayment period – even several dozen years. The mortgage collateral is the so-called mortgage established for the bank.
- Consolidation loan – is another type of liability. It involves the combination of several liabilities into one loan, thanks to which it is possible to reduce the monthly installment and facilitate repayment of the debt.
Non-bank loan – what is it?
Unlike loans, the terms of non-bank loans are regulated by the Civil Code. As provided for in Article 720 § 1 of the Civil Code, “By a loan agreement, the loan provider undertakes to transfer to the recipient the ownership of a certain amount of money or items marked only as to the species, and the recipient undertakes to return the same amount of money or the same amount of items of the same species and same quality. “
Non-bank loan companies are gaining more and more customer confidence. Most of them offer unsecured loans and guarantors. The loan period may reach up to 48 months. The maximum loan amount is set out in Article 3 of the Consumer Credit Act.
We read in it that “Consumer credit agreement means a credit agreement in the amount not exceeding PLN 255 550 or the equivalent of this amount in a currency other than Polish currency, which the creditor grants or promises to grant to the consumer in the scope of its activity”.
Unlike a loan, the loan agreement does not have to be payable. The lender also does not impose a method of spending money. The total cost of taking out a loan is calculated similar to a loan agreement. Many companies offer loans to new customers for free. The APRC loan consists of:
- amount borrowed
- commission and interest rate on the loan,
- loan margin
- administrative fees related to the preparation of the contract, verification in databases ect.
Types of loans
The process of applying for non-bank loans is done online. The most recognizable feature of online loans is: a minimum of formalities, a quick decision by the lender and an immediate transfer of money to the account – a loan in 15 minutes is possible. The main products offered by non-bank institutions are:
- payday loans – quick low-value loans with a loan period of 30, 60 or 91 days,
- installment loans – long-term loans (up to 48 months) for high amounts repaid in monthly installments.
The offer of non-bank loan companies is constantly expanding. Therefore, products tailored to the specific needs of consumers are created. Entrepreneurs can take advantage of the business loan, while borrowers with low creditworthiness can take advantage of the loan and buy a car.
Some institutions also offer loans without checking databases and even loans for those in debt.
Differences between a loan and a loan – summary
The main difference that can be seen between a loan and a loan are the available amounts and the possible repayment time. The offer of non-bank financial institutions is definitely more limited. The reason is the institution’s capital – with a non-bank loan, the money must be the lender’s property. The bank grants loans not only from own funds, but also from funds deposited by its clients.
Higher recoverable bank loans have their price. It is very thorough verification of borrowers. Both creditworthiness and creditworthiness are assessed. The credit process can take a long time and require a lot of formalities.
Applying for a loan is definitely faster and is usually done completely online or by phone. Potential borrowers are checked in databases such as BIK and BIG, however, loan companies are characterized by greater flexibility and individual approach to each client.
The amount of formalities is also smaller. Many lenders offer loans without income statements.