The words credit and loan are often used interchangeably because they seem to mean the same thing. In both cases, we are dealing with borrowing money for a specified period of time. From a formal point of view, however, these are two different financial products that are regulated by separate regulations. Below we explain how a loan differs from a loan , and what is the so-called consumer credit, which was introduced into law a few years ago.
What characterizes a loan?
Most of us rightly associate loans with banks. It is these institutions that specialize in granting them, because issues related to the loan agreement are regulated in the Banking Law .
In accordance with the provisions contained therein, the loan agreement must meet several important conditions:
- the subject of the contract can only be cash, and only a bank can grant a loan,
- the funds transferred to the borrower under the loan agreement must be earmarked for a specific purpose (e.g. investment purpose, consolidation of other loans or purchase of real estate), and the lender has the right to check how the borrowed funds are spent,
- the contract must be in writing (otherwise being null and void),
- the loan is always paid for, i.e. the borrower is obliged to return the loan amount with interest and possibly additional costs constituting the bank’s remuneration (therefore there is no such thing as a free loan).
The formal nature of the loan within the meaning of the Banking Law is justified – it is granted by banks not from own resources, but from funds deposited by other clients. For this reason, lending activities conducted by banks are strictly controlled – in Poland this supervision is carried out by the Polish Financial Supervision Authority.
What is the characteristic of the loan?
The loan is much less formal than the loan – the issues of its granting are regulated by the Civil Code (art. 720 et seq.).
Here are the key features of the loan:
- it can be given by anyone, e.g. a natural person, a company or a bank,
- the loan agreement must be in writing only if the loan amount exceeds PLN 1,000,
- it can be paid or unpaid – that’s why we can easily find promotional loans for free,
- it is granted for any purpose – the borrower may freely dispose of the money borrowed, and the lender has no right to interfere or control it.
Today, there are many types of loans due to the large freedom in concluding loan agreements.
Undoubtedly, the fast loans over the internet offered by loan institutions have become the most popular. However, there are also private loans and community loans from individuals and bank loans.
Consumer loan – is it a loan or a credit?
The concept of consumer credit was introduced into the Polish legal order only in 2011 and caused a bit of confusion when it comes to distinguishing between credit and loan.
Pursuant to the provisions, consumer credit is a loan granted only to natural persons for private purposes by lenders professionally providing such loans. Its amount may not exceed PLN 255,550.
In practice, therefore, both banks and non-bank loan institutions. As a result, a consumer loan can be both a loan within the meaning of the Civil Code and a loan described in the Banking Law .
Which is better: credit or loan?
Given the above-mentioned differences between a loan and a loan, the loan seems to be a much more friendly financial product. It is less formal than a loan, and the borrower is free to use the amount of money borrowed. Importantly, only a loan can be granted without interest – it is worth remembering, however, that loans for free are offered almost exclusively via the Internet and by loan institutions.
However, loans are products in relatively low amounts, which is why they are perfect for meeting current consumer needs. Thanks to them we can renovate the apartment, go on vacation or buy new home appliances.
If we want to borrow a larger sum of money, e.g. for the purchase of real estate or starting our own business, a bank loan will be a better solution for us.