Difference between credit and loan
Unless we have a certain financial culture, probably each and everyone of us we have confused in some occasion the terms ‘credit‘ and ‘loan‘. Of course we will have used them without distinction to refer to one and other, and will have said that thing about “I have to ask for a loan” or “I am going to ask for a credit” believing that they were meaning the same. The true thing is that they are very different, and it is suitable to realize well a few concepts on credits and loans:
- In the loan the financial institution puts at the disposal of the client a fixed quantity and the client acquires the obligation to return this quantity more a few commissions and interests agreed in the agreed term.
- In the credit the financial institution puts at the disposal of the client, in a credit account, the money that this one needs up to a maximum money quantity.
- The loan is usually an operation in average or long term and the amortization normally is realized by means of regular, monthly, quarterly or half-yearly quotas. This way, the client has the opportunity to organize itself better at the time of planning the payments and his personal finance.
- Generally the loans are personal and they grant individuals to themselves for a private use, therefore, generally need from him personal guarantees (guarantees) or real guarantees (pledges or mortgages).
- In the loan the quantity granted normally is deposited in the account of the client and this one will have to pay interests from the first day, the interests being calculated on the quantity that has been granted.