Loans and loans are often misused terms. And they certainly are not synonyms or financial products that are the same. It is also worth knowing that loans and credits are divided according to types and even institutions that grant them. First of all, it is worth learning when we deal with a loan and when with a loan.
Credit and loan – differences
The most important difference between a loan and a loan is the institution that can grant them. Loans are reserved only for banks and credit unions. However, banks and credit unions may also grant loans. On the other hand, loan companies, individuals and local associations cannot grant loans. They can, however, grant loans.
The second important difference is the ownership of money. With the loan, the money collected from the bank does not become the property of the borrower, but only the borrower can use it for the purpose stated in the loan application. On the other hand, with a loan, the borrowed money becomes the property of the borrower and he can spend it for any purpose.
The next issue is the contract. The loan agreement must be in writing and the borrower is always charged with some costs. At the same time, the loan agreement up to USD 500 may be oral. Only loans for an amount greater than USD 500 must be documented in writing. And the agreement itself is a civil law agreement that can be concluded by a company with a private person and two private persons among themselves.
Types of loans
First of all, it is necessary to distinguish private loans from loans granted by specialized loan companies. For example, private loans include:
- family loans,
- loans to friends
- loans granted by a natural person to another natural person social loans.
In turn, loans granted by loan companies are:
- payday loans (payable within a maximum of 60 days),
- short-term loans (to be repaid between 1 day and 12 months),
- long-term loans (repayment period over 12 months).
These loan forms can also be split due to the return method. Payday loans are usually payable in one installment within 30-60 days. In turn, short-term and long-term loans can be given in weekly or monthly installments of equal value throughout the duration of the loan agreement.
Loans also differ due to the method of guaranteeing repayment of the amount borrowed. Payday loans or short-term loans are guaranteed by submitting a statement of income. Income, financial obligations and other expenses are entered when submitting the application, therefore not everyone notices that this is a repayment guarantee. For long-term loans, which are usually also for higher amounts, you often have to send an official document confirming your income, eg a certificate from your workplace about your income for the last 3 months. If this is not enough, the loan company may offer a loan against, for example, a car or real estate. The pledge is also a method of guaranteeing that the borrower will repay the loan taken.