Personal Loan | Differences – a loan from a credit
- The purpose you are going to give the money requested is one of the features to consider when applying for a personal loan or credit.
- Interest on the loans is, usually higher than those applied to loans.
Will asking for a personal loan or apply for a personal loan? In most cases both terms are used mutually in reference to the action of borrowing money from a third party knowing. In advance, we will go by returning the amount in installments with interest.
You could say that the main difference in terms of definition, is that while the loan is an amount of money a lender delivery to a customer, the credit is a dollar limit of the consumer can have or not.
The interest to be paid are higher or lower will depend on several factors, including the type of customer that you, the amount of money requested, the type of entity to borrow money and, most importantly, the type of financial product that you have in front. This last point is one that make the difference between a loan and a loan because the interests of the first, usually, as a rule, higher than the other. What is that? In most cases flexibility, a feature which differences from each other.
The loans for the purchase of something concrete
- The client will receive a specific amount of money , which is what has been requested, normally used in whole or almost, to the purchase of goods or the payment of a cost.
- They can apply to both physical and legal persons, being the banks and financial institutions major lenders.
- The lender will require to know that the customer is going to give money if the amount is very high.
- The customer must deal with the return of the borrowed amount, the fees and interest in a specific time. All these elements have been reported previously and are reflected in its loan agreement.
- Length: medium or long term, depending on the amount.
- The interests of those who will face the borrower must be of the entire amount borrowed.
- Fees: Additional costs are associated with the interest. These are solvency study, opening or early termination, among others, is higher than those of the credits.
- Flexibility: any variation in the contract will associate additional costs to be borne by the customer.
- To renew or extend the time necessary to conclude a new contract, so you have to deal with the new fees and expenses.
Credit, “wildcard” to make some payments
- The customer has no reason to have all the money at once. You can have the amount you need at any time, using amounts of money and reintegrating as many times as desired.
- The lender can only be a legal person, you can not grant an individual credit.
- They are often used to deal with expenses smaller than loans.
- The customer has no obligation to explain why you want or what is going to spend the money.
- The client may partially or fully reimburse the sum to be spent before the loan becomes due.
- Duration: short-term.
- The customer will have to pay interest on the amount from which it has ordered and not the total credit that the lender has granted.
- The credit needs, in many cases, a bank account where the money is entered, and the most common way in which it is available will be through a credit card. It may also be arranged by direct debits money or checks, inter alia.
- Flexibility: greater than the loan. When the term ends you can renew or extend, in fact, in the case of credit cards are automatically renewed.
- Default interest for late payments or repayment of the credit amount you’ve spent interests outweigh the loan due in part to the flexibility. They can become up to 25% APR depending on the type of entity and the type of credit card. These data are contained in the contract for the credit card.
Similar but not identical
In general rules, these are the main differences between loans and credits that must be taken into account when deciding which of these two financial elements suits you best or best suits your needs.
Interest, fees, flexibility or amount awarded are not identical for all users but will vary according to the entity with which these products are contracted, the client profile or type of product chosen.