Sunday, 20 September, 2020

What is the difference between a loan and a loan?


Many people wrongly believe that a loan is provided by a bank and a loan by a non-banking company. From the point of view of a person who borrows a certain amount of money, there is practically no difference between the two concepts. However, many people are interested in the difference between a loan and a loan. So how is it?

Banks and non-banking entities attract us from all sides for advantageous loans and credits. Both terms are commonly used interchangeably, but their meanings differ from one another. What is the difference between a loan and a loan?

The difference between the loan and the credit lies in the legal form

The difference between the loan and the credit lies in the legal form

As the name suggests, the difference between a loan and a loan lies in the legislation. The loan is defined by the Consumer Credit Act, while the loan is dealt with in the Civil Code. Therefore, only companies with a business license, such as banks, can provide loans. However, the loan can be provided by virtually anyone, because it does not have to be exclusively lending money.

 The subject of the loan is always money, the subject of the loan can be any movable property.

Thus, from a legal point of view, the difference between a loan and a loan is that only the money can be the subject of the loan, while the subject of the loan (since 2014, this term has been replaced by ‘loan’) can be any tangible thing. If a person borrows money, there is basically no difference between a loan and a loan. In both cases, he is provided with financial means and a remuneration (ie interest) is agreed for their borrowing. However, it may also be a zero interest free loan.

What is the difference between a loan and a loan:

What is the difference between a loan and a loan:

  • The loan agreement is regulated by the Consumer Credit Act, the loan agreement is dealt with in the Civil Code
  • The loan agreement is consensual (applies regardless of whether the money is actually provided), the loan agreement is real (it takes effect when the money is taken over or other things)
  • A business license is required to provide a loan, anyone can provide a loan
  • The subject of the loan is exclusively money, the subject of the loan is any movable property

Under the Consumer Credit Act, lending companies must be licensed by the Best Bank. This is available both to banks and to many non-banking companies. Even in the case of non-bank “loans” then we are legally talking about credit.

It has already been mentioned that interest is negotiated for both the loan and the loan. However, anyone who wants to avoid interest can bet on the first free loan, for which interest is forgiven if the conditions are met.