We often come across the terms “loan” and “loan”. What is the difference between them for an ordinary person can be incomprehensible. Often a loan is called a “bank loan." However, there is a big difference between the two. To find out how a loan differs from a loan, you need to familiarize yourself with the economic nature of these two concepts.
The fundamental difference between a loan and a loan
In general, a loan is a money amount issued by a banking institution at a percentage for a certain time. The main characteristics of the loan are payment, maturity and repayment. It follows that this type of relationship does not imply the issuance of borrowed funds free of charge or for an unlimited period. You can’t say about a loan, which can be not only in monetary terms, but also in the form of property. In addition, it can be given both free of charge and paid. The concepts of “loan” and “credit” are discussed in more detail below. What is the difference between them can be understood, if only to study their main features.
Credit
A loan has the following features and distinctive features from a loan.
- The relationship between the borrower and the credit organization that provides the loan is regulated by both the Civil Code and financial legislation.
- Having studied the concepts of “loan” and “credit”, what is the difference between them and the participants in these relationships. A creditor can only be a legal entity that has a license from the Central Bank for lending. It can be banking institutions, microfinance organizations and others. And the lender can be both a legal entity and an individual.
- Lending can only occur in cash.
- The lender is not the owner of the borrowed funds, he plays the role of an intermediary, and the accumulated money is the debit deposits of third parties and the amount of interest received from other borrowers on other loans.
- A loan agreement between the bank and the borrower is required to be concluded for any loan amount.
- If you look at the economic nature of the concepts of “loan” and “credit”, what is the difference in the fact that lending should be paid, that is, the lender should set the interest rate for using borrowed funds. In addition, he has the right to also include fees for credit support. A loan can be both free and paid.
- The interest rate level should not be lower than the refinancing rate at the time of issue of money, otherwise the lender will go bankrupt, as he has his own obligations in the framework of debit deposits and his own loans.
- The lender can develop targeted loans, which involve the allocation of funds received by the borrower, only for the purposes that are specified in the loan agreement.
- Another feature that distinguishes a loan from a bank loan is that the loan debt is fully repaid at one time, and the loan is repaid in installments, according to the schedule presented in the loan agreement.
- The lender has the right to legally demand from the potential borrower a pledge in the form of property or a guarantee of third parties, as well as impose penalties for late payment of the loan.
- Property under collateral is considered encumbered, and the borrower's rights to it are limited until the loan is repaid. If collateral damage occurs, the bank has the right to demand full compensation from the borrower , even if the borrower pays all loan payments on time.
- The difference between a loan and a loan lies in the fact that in the case of a loan, the lender has the right, if the borrower refuses to return the borrowed money, to demand through the court to fully repay the debt, together with all fines.
- A loan is distinguished by the presence of special lending products with state support, which allow certain categories of borrowers to receive money on favorable terms.
Loan
In the concepts of “loan” and “credit”, the difference is that the loan does not have to be paid. A loan is one of the loan options offered by a bank or other credit institution. And a loan can also be obtained, for example, at the enterprise in which the person works, and the like.
Types of loan
So, the concept of “loan” is used more widely than “loan”, and it has the following types:
- Consumer loan.
- Bank loan.
- Property loan.
A property loan involves the transfer of property, banking - this is a bank loan on a paid basis, and a consumer loan is issued when a person purchases a thing, for example, household appliances, a car, etc.
Why do I need a loan?
Why do I need a loan if you can take a loan and not pay interest on it? To answer this question you need to understand how a loan differs from a loan and what advantages they have.
To take a loan or borrow money from someone, you must have a trusting relationship with the lender, and to achieve such a relationship you need to try hard and hard. And to get a loan you only need to confirm your credit organization your solvency. Today, banks have developed credit programs that allow you to get a small amount of money with the presentation of only a passport. True, such lending involves increased interest rates, which is associated with the risk that the bank bears.
The similarity of a loan and a loan
There are similar points in the concepts of "loan" and "credit." What is the difference to the reader is already clear. And what are they similar?
Both of these concepts imply that borrowed funds or property (in the case of a loan) must be repaid. The loan must be paid interest, as well as commissions for the use of cash. In the case of a loan under the contract, a certain fee for the transferred property may also be provided, which may be expressed in cash.