Differences Between Credit And Loan

Credit And Loan

Although many times we have heard of credit and loan interchangeably, both are not the same thing. The loan allows you to have cash, pay the interest and commissions that apply to your bank and dispose of it little by little or all at once. It is what most of us mortals use to buy a car, for example. You have constant installments and pay interest for the total amount of money you have requested.

The credit is something different, the bank in this case allows you to have an amount of money (a line of credit) and in this case you pay to have that money in your account but you only pay interest for the amount of which you actually have.

It is more used, for example, by small entrepreneurs to have liquidity. Imagine that you have pending payments with a supplier, but you do not know the exact amount and they may also arise. Then you would ask for a line of credit (and they would charge you for it) and you would be pulling it. As you use it, you would pay interest. (it’s more like a credit card).

In addition, normally the credit can be renewed or extended, while in the case of the loan you have to contract a new one.

Remember the more training in Personal Finance the more chances to get out of this crisis. It is in your hand.

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