Normally, users tend to use loans and credits as synonyms. But the reality is that they are two different financial products. If you want to know the differences between a loan and a credit, read on:
Loan vs credit: differences
When we need extra money, we can turn to different financial products to get us out of that trouble. It is at that moment that we usually hear about loans and credits. But they are not exactly the same. Let’s know the differences.
Starting with the loan, we are facing a financial operation in which an entity or lender gives the borrower a fixed amount of money at the beginning of an operation. The condition is that the borrower returns that amount of money along with the associated interest within a certain term.
Payment of the loan repayment is usually made through monthly installments but also quarterly or semiannually, among others, over the agreed term.
As for the amount to request, it depends on the financial entity. For example, in Fintonic we offer up to 50,000 dollars, with conditions that vary according to the client’s FinScore. That is, the better the financial health, the better the conditions of said loan.
You also have the possibility of having all the money at once in your account in a matter of 24 or 48 hours, so that you have it when you need it.
Credit is the amount of money that an entity makes available to a user
The main difference is that the customer is not given the full amount at the beginning of the coup, but can use it as needed through a credit card or bank account.
The client may dispose of the money as requested, and will only pay interest for the money he uses; not for everything. Although in this case, a small commission is usually charged for the unused balance.
At the time the money is returned, more can be available, but always within the established limit, since the terms can be renewed or extended. Unlike loans.
Another difference is that interest on loans is also usually higher. For the convenience of having money at your disposal to use or not whenever you need it.
So, as you can see, these are the main differences between loans and credits. Because although it may seem the same, you see that they have little to do.
Credits are more common by companies
How do you imagine, given the characteristics of each one, credit is more used by companies. It is what is most commonly known as a line of credit, money that they always have at their disposal to use or not whenever they need it and not stay in red numbers.
Loans, the order of the day between individuals and companies
Loans are usually requested to finance the acquisition of a good or a service. That is, the purchase of a car, a reform of a house, the payment of some studies, a trip, etc. These are some of the reasons that lead users to apply for a loan. Therefore, both individuals and companies can use them as long as they need them and comply with the requirements.
Therefore, now that you know the differences, we hope you know when to apply for a loan or credit as you need. You can also ask us and we will gladly help you. We speak?