What is the difference between loan and credit?
When there are emergencies of money, many times the urgency does not allow to review in detail the options at your disposal to make the best decision.
From obtaining a line of credit to requesting a loan, it is important to inform yourself and know what makes them different and how they fit your needs. We explain the difference and help you choose wisely:
What is a credit?
A credit is when the client has a certain amount of money for a previously established period of time. You do not receive the money at the beginning of the operation, but it is granted through an account or card as you need it.
Interest is charged only on the amount that has been used, in addition to a commission on the unused balance. For example, you can have a credit of $ 40,000 pesos, but it is likely that you only use $ 10,000, so you would only pay interest for the 10,000, not for your total credit.
Among its requirements to grant it is to have a good credit bureau rating; private company that acts as a record of the activity of all those people who have had, or have bank and non-bank financial credits.
What is a loan?
Unlike a loan, the loan grants a fixed amount of money at the beginning of the process between a lender or financial entity (who offers the money) and the beneficiary (who receives the money).
Unlike a line of credit, a loan cannot be renewed several times at the end of the term. Also, did you know that some home loans can be granted even if you don’t have a perfect credit bureau rating?
The agreement is based on the lender liquidating that amount along with the interests within the agreed time range and the interest rates are usually lower than on the credit lines.
Determine what amount is required
In both cases it is important to determine what amount is required as well as the deadlines to pay and that you can easily get out of trouble, it is important that you manage the money you will need well and contemplate the payments and the deadline to be able to make your payments without pressure.