Is a “big loan” a loan, and a “small loan” is a loan? Although many people use the terms “loan” and “loan” interchangeably, these terms are meaningfully closely related, from a legal and formal point of view, they mean two different financial products. What exactly are different and what makes them almost identical?
Good credit day! – definition of the concept
The most important difference between a loan and a loan is the fact that the loan is offered only by banks and cooperative savings and credit unions. No other financial institution has the right to grant it! This is precisely regulated by the Banking Act. Therefore, if you decide on this form of obligation, remember that the loan contract must always contain information on what the borrowed funds will be allocated to.
In accordance with the Banking Act, a person who has signed a loan agreement is also required to specify in writing the date of return of the amount credited, interest accrued and rigid adherence to the repayment schedule. In any other case, as the oral promise to pay the debt is simply not valid!
What else do you need to know about the loan?
- Granting a loan is always free – its costs include various elements. How: commission, bank margin, interest, as well as interest and other additional fees, e.g. notarial fee or application fee,
- After positive verification, the bank transfers cash always in the form of a bank transfer, and never in cash!
- The funds borrowed from the bank do not become the property of the borrower – but they are obligatory. Banks providing support do not devote their own resources to it! They mainly manage amounts deposited by their borrowers,
- The loan agreement is a special-purpose contract – which means that the money borrowed from the bank must be transferred for a specific purpose, documented in writing. It can be, for example, building a house, refurbishing a flat, buying a plot or completing a school layette. The lender also has the right to control how the loan has been used! And if the amount declared has been earmarked for another purpose, it may be required to return it in full and immediately!
- Almost every loan is secured – in practice, the most frequently used is a mortgage, but also bills of exchange, bank guarantee or letter of credit. In this way, the lender tries to secure in a number of ways, against any possible failure of the payer from the contract,
- The process of receiving a loan is time-consuming – it involves accurate client verification, which is checked for debt.
- Not every financial product on the bank’s offer can be called a loan! – yes, in the case of a revolving loan that does not meet all credit criteria, such as the amount of monthly installments or the repayment of debt within a specified period.
Payday loan – a product offered not only by banks …
Many people avoid borrowing, which they treat as a binding commitment and transfer their interest to easily available loans. Only if it is not a jump from rain to the gutter? Unlike a loan, a loan is a much more complex concept, which is defined in the provisions of the Civil Code. This means that the bank may equally well commit, but also a loan company or a natural person. And it does not matter if the physical entity signs the contract as a private person or as the owner of the company he runs. According to art. 720: the borrower undertakes to transfer to the owner of the recipient a certain amount of money or things marked only to the species, and the taker undertakes to return the same amount of money or the same amount of the same species and the same quality.
Therefore, the object of the loan can be not only money, but also things. It is only important to assign them to a suitable group, e.g. gasoline or coal. In turn, the object of the loan can not be an object that has specific features assigned exclusively to it. It can be a car with a specific registration number.
What else do you need to know about the loan?
- Loans below 1 thousand PLN do not have to be defined on the basis of a written contract – the rules can be passed in the oral form as well!
- A loan agreement is not a specific agreement – during the application process for additional funds, you do not need to provide any information about what you want to transfer the borrowed money to. And what follows – the lender has no right to control the money spent,
- When concluding a loan agreement, there is no obligation to set the date of its return or the price for its granting – it is up to the parties to decide whether the obligation will be provided for consideration or free of charge,
- No regulations regulate it,
- It has various forms of security – it may be a surety, bill, pledge, voluntary submission to the execution or registered pledge,
- After positive verification, the lender may transfer funds in 3 ways: by bank transfer, in cash or by check,
- Money received under the loan agreement becomes the property of the borrower – the lender must always be the owner of the amount he will get!
- They are more easily available to the average Kowalski than bank loans – when applied, the verification procedure is simplified to a minimum. There is usually no obligation to provide any documents or certificates. That is why the time of accepting the application and transferring the money is short and can be up to several minutes,
- The lenders do not require a form of surety – yes, there are loan companies that demand a pledge, for example in the form of a car or real estate. But such activities are mainly carried out by unreliable institutions that lend money to the indebted person! Read also: How to get out of bank debts?
What better to take – credit or loan?
As you can see, the concepts of credit and loans refer to completely different financial products. The only thing that connects them is the provisions of the anti-usury law. It stipulates that the annual interest rate on borrowed liabilities may not exceed 4 times the lombard rate of the National Bank of Poland – that is 12%. That is why their choice is only seemingly simple … However, it is easy to notice that even a small commitment may turn out to be a burden that will be won at every step. Therefore, the decision to borrow any money is worth rethinking in advance to avoid falling into the “spiral of debt”! And first of all, start differentiating the loan from the loan, because these two concepts are not identical at all!