Loan and loan – how do they differ?

Loan and loan – concepts similar to each other, both derived from economic terminology, but definitely differing in their interpretation. When the given commitment given to the client is a loan and when the loan? What is the difference between a loan and a loan?

The concept of credit

The concept of credit

What is a loan ? The commonly accepted definition indicates that the loan is a liability which a financial institution authorized to undertake banking activities grants to the borrower. A loan is the physical provision of a certain amount of cash for a specific purpose by a bank or a cooperative savings and credit union. The borrower , by taking a loan under a signed loan agreement in which the purpose of the loan is indicated, undertakes to return the loan principal together with accrued interest to the creditor for a fixed period in the contract. They are the remuneration that the lender collects for granting the loan.

Granting such as credit commitments is preceded by an analysis of the capacity and reliability of the credit potential customer. Ability should be understood as a real possibility of monthly, timely repayment of principal and interest installments during the loan period. The level of creditworthiness is affected by the level of monthly income and the borrower’s costs incurred by the borrower, eg due to installments of other financial liabilities, rent, fees for utilities and the like.

The Bank also checks the financial situation of the client in many databases, and in the first place in the database of the Credit Information Bureau, which stores information about all borrowers in Poland, regardless of whether they regularly pay installments or have delays in repayment. Positive entries in BIK work in favor of a potential borrower and accelerate the issuance of a positive credit decision.

What is a loan?

What is a loan?

The loan is also a financial obligation, but it can be provided by virtually any entity, even by a natural person who does not conduct business. All rules for granting and incurring loans are included in the provisions of the Act of 12 May 2011 on consumer credit, the provisions of which came into force in Poland on December 18 of the same year.

A loan is also a consumer loan if its amount does not exceed PLN 255 550 or the equivalent in a currency other than Polish. The entity that grants the loan can be any person or institution that has the appropriate amount of money to make available to the borrower on the basis of a previously concluded loan agreement.

What is the difference between a loan and a loan?

What is the difference between a loan and a loan?

A loan and a loan are obligations in which one party is guilty of the other, on the basis of a written or verbal contract. The difference between a loan and a loan lies in who can commit. Banks, Credit Unions, loan companies and other entities that own loan capital may grant loans within the limits of applicable regulations, but only banks and credit unions are entitled to grant loans.

The loan agreement must be compulsorily concluded in writing, and with the loan such a form is not required up to PLN 500. Later, the contract, similarly to a loan, should be drawn up in writing.

The loan is granted for any loan purpose, with minimum formalities, even online, without a personal visit to a loan company. We will get it despite the negative entries in BIK, although on slightly less preferential terms.

A special type of loan is a mortgage in which the mortgage established on a residential property is secured. Only bank institutions provide such loans, and loan companies have no right to secure their claims in the same way.

Loans and loans are similar products, although there are differences between them that do not allow the use of these two terms interchangeably.