Credit and loan - what are the differences between them?

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Credit and loan, although often treated as alternative concepts, are in fact different products that differ in legal terms. A closer acquaintance with the nature of each of them may turn out to be important, especially when deciding on the form of fundraising.

Only banks provide credit

Both credit and loan are a form of debt incurred. In both cases, there are two sides - the principal and the principal. However, as already mentioned, each of them is subject to separate regulations. The loan has been regulated in detail by the banking law. However, in the case of a loan, civil law applies.

Secondly, a loan may only be granted by a bank, unless special regulations provide such an option to another entity. Moreover, these institutions do not grant loans from their own resources, but generally use funds deposited by their clients for this purpose.

Loans, on the other hand, may be granted by any natural person or institution that owns the funds allocated for this purpose.

Credit and loan - differences in contracts

There are also significant differences in terms of contracts between the two products. First of all, the loan agreement must be concluded in writing under pain of nullity. It should specify, inter alia, parties to the contract, the purpose for which the loan was granted, the terms and date of repayment, the amount of interest and commission.

When it comes to a loan, the law is not so restrictive, giving you the option to choose any form of contract. In art. 720 paragraph 2 of the Civil Code, there is a provision that in the case of a contract with a value exceeding PLN 1,000, it should be confirmed in writing, but this does not mean that failure to comply with this requirement will mean its nullity.

The matter of transfer of ownership

By way of a loan agreement, ownership of a specific amount of money is transferred, and the lender cannot intervene in the way the loan object is used.

On the other hand, the loan agreement means the transfer of funds by the lender to the borrower's temporary disposal. Moreover, as mentioned previously, the funds being the subject of the loan must be used in accordance with the purpose specified in the contract. However, there are exceptions to this rule - consumer and business loans, which are usually granted to cover the borrower's current expenses.

There are also differences between a loan and a loan with regard to the subject of the contract itself. The first of them may only apply to money paid out in a non-cash form. With a loan, it can be not only money (also paid in the form of cash), but also other things marked as tangible items.

What about the fee in the case of a loan?

The loan agreement is always a payable agreement - the bank charges a commission for granting it, and charges an interest rate on its use, specified earlier in the agreement.

However, according to Art. 720 of the Civil Code, the loan agreement is a free agreement. However, it is allowed to stipulate in the contract that the lender will receive a specific remuneration for granting the loan, but this is not a necessary action. It is not fully settled whether the issue of remuneration must be specified in the loan agreement, however, in accordance with Art. 56 of the Civil Code, may also result from an established custom.

As you can see, even though both the loan and the loan serve the same purposes, they are very different both in terms of the party granting them, as well as the subject of the contract and its form.