Credit and loan – what are they and what are the differences?


Many people nowadays need an extra injection of cash for current expenses or investments. Often, customers who want to borrow are wondering whether credit or loan will be better.

The terms ‘loan’ and ‘loan’ are often used interchangeably, not surprisingly, after all, both credit and loan are associated with incurring debt. However, according to the law, these two concepts differ significantly. These financial products differ legally and are also granted on slightly different terms. Both are also addressed to completely different clients.

The loan is carried out by banks based on the Banking Act, while the loan may be granted by a natural person, which is regulated by the provisions of the Civil Code. Therefore, the differences between loans and credits are large and – both of them are related to incurring debts, which must be returned later.

What is a loan?

What is a loan?

The loan is a financial product offered exclusively by banks and cooperative savings and credit unions. No other institution may grant loans.

The loan is ideal if you are building a house or buying a car, in other words – you need larger amounts and you want to have a comfortable repayment obligation. A loan is a financial product that customers pay back in installments. When taking a loan from a bank, specify the purpose for which we will allocate the money received. From a legal perspective, the money received under the loan is still owned by the bank. Therefore, the bank has the right to know what they will be used for, and even control whether we spend them in a fixed way. If it turns out that the money was spent for a purpose other than agreed in the contract, the bank may even demand a refund of the entire amount.

Taking a cash loan always involves a written contract between the lender and the borrower. The process of granting a loan at a bank can be time consuming. The contract must clearly specify the purpose of the loan, the amount of the commission, interest rate (and the rules for changing it), as well as the manner and period of repayment of the obligation incurred. In most cases, banks also require the presentation of employment, earnings and income certificates. The bank additionally analyzes your creditworthiness using a procedure called scoring. All this can take a lot of time. When granting a loan, the bank secures itself in many ways, eg a surety or mortgage.


Credit and loan – differences

Credit and loan - differences

Credit and loan are two separate products for customers with different purposes. Loans are also characterized by a higher level of receiving a positive decision than in the case of a loan, which requires a lot of documents to be completed, certifications, high and stable remuneration, and an impeccable credit history.

  • An additional injection in the form of a loan is taken from a bank and a loan from a non-bank institution;
  • The loan is granted for larger amounts, loan up to a maximum of 25,000;
  • We repay the loan for several years, the loan should be repaid up to 48 months;
  • The loan requires a written contract and the loans are usually signed in writing or orally;
  • The loan is always granted in the form of a transfer and the loan can also be obtained in a transfer or in cash;
  • You use the loan money for a specific purpose, and the loan money for any purpose.