Credit and loan, although often treated as alternative concepts, are in fact different products that differ in legal terms. A closer look at the nature of each of them can be important, especially when deciding on the form of obtaining cash.
Only banks grant the loan
Both credit and loan are a form of debt incurred. In both cases, there are two parties – the funder and the borrower. However, as has already been mentioned, each of them is subject to separate regulations. The loan was regulated in detail by the provisions of the banking law. However, in the case of a loan, civil law applies.
Secondly, only a bank can grant a loan, unless specific provisions give such a possibility to another entity. Furthermore, these institutions do not grant loans from their own resources, but generally use the funds deposited by their clients for this purpose.
On the other hand, loans can 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 the contracts between the two products. First of all, the loan agreement must be concluded in writing to be valid. It should specify, among others parties to the contract, purpose for which the loan was granted, repayment rules and dates, interest rate and commission.
With a loan, the law is not so restrictive, giving you the option of choosing any form of contract. In art. 720 section 2 of the Civil Code there is a provision that in the case of a contract with a value exceeding USD 1,000 it should be stated in a letter, however, this does not mean that failure to comply with this requirement will mean its nullity.
Issue of ownership transfer
By way of a loan agreement, the ownership of a specific amount of money is transferred and the person granting it cannot intervene in the manner of using the subject of the loan.
The loan agreement, on the other hand, means the cash being transferred by the lender for the borrower’s temporary disposal. Moreover, as has already been mentioned, the funds subject to the loan must be used for the purpose stated 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 the loan and the loan in relation to the subject of the contract itself. The first of these may relate only 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 material items.
What about payment in the case of a loan?
The loan agreement is always a paid agreement – the commission charges a commission for granting it, and the interest rate specified earlier in the agreement is charged for using it.
However, according to art. 720 of the Civil Code, the loan agreement is a free agreement. However, it is allowed to specify in the contract that the lender will receive specific remuneration for granting the loan, but this is not necessary. It is not entirely clear 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, despite the fact that both the loan and the loan serve the same purposes, they differ greatly in terms of both the party granting them and the subject of the contract and its form.