When most people hear the words “loan”, “loan” or “credit”, they really do not see the difference between the three terms. And only professionals can distinguish the meaning of each word. Professionals will never mix up a loan with a loan or a credit because they know where each difference lies and under what conditions each of these financial products can be obtained. By reading our article, you too will stop confusing these meanings and, if you need financial help, easily differentiate between a loan and a loan.

The essence of all three concepts is the same: one person borrows money or other assets from one another, but returns what he has received with some compensation, ie a usage fee.

What is a loan?

What is a loan?

Borrowing is the transfer of money or other assets for a fixed period of time. The person who issues the loan is called the Lender and the person who receives it is called the Borrower. The main purpose of the operation: to return the assets in full and in due quality by the end of the (contractual) term.

In civil law, only a transaction approved by both parties by written agreement can be recognized as a loan. The borrowing differs from other similar procedures in that, for the entire period of its repayment, the Borrower becomes the full owner of the item or money temporarily transferred to it. The borrower has the right to dispose freely of all objects (money, valuable assets and precious metals, gems, etc.), but only for the period specified in the contract.
If, during the course of use, such articles have lost their original attractive appearance, damaged or lost, the Borrower shall be responsible for the loss. At the end of the term of the Agreement, the Borrower is obliged to return all items or money in full and in their original quality at the time of receipt. The quality of the items at the time of return must be similar to the quality at which the Borrower received the values, ie the loan assets must be:

1. having the same meaning,
2. the same quality,
3. in the same amount or quantity,
4. at the same price as the assets were received.

Another specific feature of a loan is that you cannot lend unique or in some way unique assets or money. This observation must be followed so that in case of loss the Borrower can easily replace the item and return it to the Lender.

What can be a loan

What can be a loan

The object of the loan may be, first and foremost, money, but the following expressions of assets are acceptable: fuel, building materials, foodstuffs, non-food goods, tools, etc. It is forbidden to lend collections and exclusive items, as in the event of damage or loss, it will be difficult for the Borrower to assess the loss suffered and to fully reimburse the cost of the loan.

And another key feature of a loan is that the loan itself does not oblige you to recoup the use of assets in cash or otherwise, so its core is a gratuitous transaction. Unlike a loan or credit where the primary condition of the transaction is the annual percentage rate of charge. While borrowing is essentially a free transaction, it does not exclude the possibility of consideration, whether monetary or otherwise.

Summarizing what a loan is then, the following conclusion can be drawn: If you need to use a loan, you may receive money on cards, products, securities and other assets, subject to a mandatory return and reimbursement agreement with the Lender.

What lies beneath the term “loan”

What lies beneath the term "loan"

A loan is a term used to call a temporary transfer of money (possibly on a card), with the property being compulsorily returned to its original owner. Often a loan is confused with a loan or loan, or is called in one of these terms.

In most cases, the loan can be found at banks, where customers receive it on their account. Many people are mistaken to call such an operation a “loan” or “loan” because the first feature of lending is the interest rate charge and the loan feature is a gratuitous transaction. There are no such conditions for a loan. You can also get a loan at a company: many organizations show their employees exactly the kind of loyalty that is provided for in the company’s articles of association. The transfer can be received in monetary terms, on the bank card or in any kind of property, and the terms of return are stipulated upon signing the contract.

The only condition that must be met in any such transaction is that the property loan can be obtained free of charge but for a limited period. If you decide to get a cash loan, such nuances are determined on an individual basis, and repayment terms are mandatory before you receive any assets. If the terms of the cash or property loan have not been agreed, the Borrower shall return the items not later than 30 days after the Lender has requested the return of the funds.

Throughout the loan repayment period, the subject of the agreement is the Lender. The same items that were taken as a loan must be returned, not by analogy, but rarely able to meet this condition. If you have received a loan on your bank card, you will be able to return it by money transfer.

Initially, the loan does not provide for the calculation of interest, but may be provided for in the contract. In the absence of a specific rate on the use of the assets, the refinancing rate of the region in which the Lender is located shall apply. Items lent cannot be subject to interest. The main condition of the transaction is its gratuitous nature. However, if the contract provides otherwise, the borrowing shall flow into a loan or lease. When calculating interest on an item, the loan assets must be repaid with a premium in the form of an interest payment. Most often, a loan can be used to buy real estate, a car, or a repair.

We determine the nature of “credit.”

We determine the nature of "credit."We determine the nature of "credit."

After looking at the terms “loan” and “loan”, we can move to a more commercial way of lending money called “credit.” This is the most common type of financial operation, and you can get this type of cash assistance from any bank or microfinance organization. The main distinguishing feature of a loan is that it always has a cash value, in other words, the borrower can only obtain the credit in cash or by transferring money to his bank card.

The subject matter of the credit can be determined instantly – there can only be one option – money, but all other terms and conditions are necessarily set out in the credit agreement between the Borrower and the Lender. Such an agreement will specify the amount of money received, the loan repayment time and the interest rate for using the loan money. Unlike a loan, the main feature of a loan is the mandatory calculation of the loan interest, which is paid monthly or as stated in the contract.

Unlike a loan, a credit is always the transfer of money for consideration within a specified time and for a fixed fee.

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