No, it’s not the same! Although both are ways of financing something we need, such as paying off a debt, they work differently. In this note I tell you more of both so you can know which one you need.
What is a credit? I need it?
When you ask a bank to give you a loan, you are asking them to open a line of credit in your name. This will set an amount that you can arrange when you need it. The amount you use will be deducted from your credit limit. You will recover the maximum balance as you pay your debt.
A credit that many people use is that of a credit card. The credit line of a card is delimited by the bank and can be extended by good payment behavior or by increasing your income. The interest you pay for the consumption of a credit card is set based on the amount you have used and not for the total of your credit line; so it’s up to you to have less or more interests.
What is a loan? Suits me?
Unlike a credit, a loan – either a personal loan or a business loan , etc. – It is a contract signed with the bank after which, who requests it, acquires an amount of money. That money must be returned in a certain amount of time through fees. A loan is less flexible than a loan, since there is a procedure to dispose of the money.
They are recommended for long-term financing
Similarly, a loan usually has a lower interest rate than a loan, therefore they are recommended for long-term financing. Loans are usually recommended for individuals, whether for a business, investing in the home or taking vacations , etc.
Now that you know more about what a credit and a loan is , which one do you think is best for you? Don’t forget to read the contract well before signing it! And of course, compare all offers well before deciding on one. This will reduce the payment of interest, commissions and you can opt for the one that gives you more benefits.