The terms of credit and loans are very often used as replacements. Probably you can still meet people who are convinced that the loan and loan are one and the same financial instrument, which you can call in two ways. Nothing could be more wrong – they work in a similar way, but the legal effects they cause are not the same.

The issue that links these two – let us call it services – is the creation of a commitment. This is a common feature, next to which there are at least a few, extremely important differences.

Legal regulations for credit services and loans

Legal regulations are the first and probably the most important issue determining the functioning of loans and credits. The methods of granting loans, their rules, forms of inference, etc., are specified in the Act called Banking Law, whereas loan agreements, the ways of their conclusion, actions, etc., are in turn governed by the provisions contained in the Civil Code. This is very important, if only because it is clear that loans can only be granted by Institutions, whereas loans can be services provided by private individuals.

The form of concluding the loan agreement and the methods of concluding loan agreements

Another very important matter is the form in which the contract should be concluded, so that its conclusion can be recognized and have legal effects. In the case of a loan, it is necessary to conclude a loan agreement in writing, otherwise the contract can not be considered binding. Such a method of concluding credit agreements is required by the Banking Law, which says that in such a contract you should also include detailed information about loan installments, their repayment dates, consequences in case of delays in repayment and interest issues.

As for the loan agreement – a written agreement is only required if the value of the loan exceeds PLN 500. If lower amounts are at stake, the loan agreement may be concluded orally.

Credit costs and loan costs

Credit costs and loan costs

In the case of a loan agreement, you may encounter a situation where a person, company or institution that lends money will not demand any additional fees for granting the loan. Thus, the loan can be granted free of charge, which is never applicable in the case of a loan. Credit agreements are always payable and charged with various additional costs such as commissions or interest.

In what form must a loan be granted and what forms are foreseen for loans?

In what form must a loan be granted and what forms are foreseen for loans?

A loan granted by a banking institution is always in the form of a bank transfer sent to the account number provided by the person applying for the loan. In the case of a positive decision on obtaining a loan, there is no such requirement. Cash in the form of a loan may be provided in the form of a transfer of funds between the bank accounts of the Lender and the Borrower, as well as they may be transferred in cash.

Loan and loan and their forms of ownership

A definite difference between a loan and a loan is the fact that when the cash is transferred in the form of a loan, the money becomes the property of the Borrower. He is the full dispatcher and can allocate them for any purpose, regardless of the circumstances of the loan collection or their form, etc. The funds received as part of the loan – what is very important – may be canceled, and in the case of a loan, there is no question of it. The funds received from the loan are only theoretically owned by the Borrower, they will fully belong to it at the time when the loan is repaid in full, together with interest. In the case of a loan, it is not possible to cancel it, it is an obligatory obligation!

A very important issue is also the fact that cash provided in the form of a loan is the property of the bank’s clients, what loan it grants, while in the case of a loan, the money must be the property of the lender.

Funding – should a loan and loan have a specific purpose?

Funding - should a loan and loan have a specific purpose?

In the case of a mortgage, it is only granted for the purchase of a flat, house or plot. It is not possible to take out a mortgage to buy a car, electronics, travel and other things. The same applies to a cash loan, which is also granted for a specific purpose, which can not be changed without informing the bank granting the loan and its consent. In the event of their absence, the dishonest Borrower has sanctions, which may be the need to immediately return the entire amount borrowed.

The situation is different with the financial resources received under the loan agreement. According to the provisions of the Civil Code, at the time of receipt of funds from the Lender, the Borrower becomes their owner and sole administrator, which is characterized by the privilege of earmarking it for any purpose. Do you want to know how to withdraw from a loan agreement? 

As we can see above, there is a diametrical difference between a loan and a loan. Loans are less formalized services and more affordable for private persons, while all activities related to the issue of loans are strictly regulated by the provisions of the Banking Law, and the issues of their granting, application, repayment etc. are much more complicated.