What is a credit?
A credit is a financial operation through which a person, who would be the creditor, makes a loan to another, which would be the debtor, of a certain amount of money. Therefore, who requests and receives this loan must comply with the conditions agreed in the credit agreement and commit to make the payment of the acquired loan and reimburse it in the agreed period together with the corresponding interests.
How is a credit different from a loan?
While a loan is apparently a loan, then what is the difference? As we said, a loan and a credit are different products that fulfill different financing purposes. So, how is a credit different from a loan? Let’s see it below, and with an example so that it can be understood.
- If you request a loan the financial institution will make an income of the amount of money you have requested and you will have to return it in the time established in the contract, through monthly installments. In addition to the loan you will also have to repay the interest accrued on the outstanding capital.
- If you request a credit the entity will make available a certain amount of money on credit. You will have the money you need and you will only have to pay interest for that amount you use. So when you have to repay the loan you will only have to pay the interest accrued on the amount you have withdrawn, and not on the total credit granted.
So, although in both cases they are loans, the main difference between loans and loans has to do with the payment of interest, basically. While the loan will have to be repaid along with the interest on the balance to be repaid, the loan will only have to return the interest accrued on the amount used, and not another euro. Therefore, a loan can be a good solution if you need credit but do not know exactly when you need capital. An example: If we ask for a credit of 3,000 euros and finally we only use 1,000 euros, we will have to pay the interest of the 1,000 euros used. On the other hand, in a loan of 3,000 euros, the total amount will have to be returned along with the interest on the entire loan.
What types of credit can you request?
As with loans, the selection of credits to which we can resort is very broad, which will help us to request and receive the loan that best suits us. Consumer loans are a type of credit used for the purchase of goods and services. These are offered by businesses and are used so that we can acquire a product and pay it in installments without interest or at a very low interest rate. The objective is to promote the sale of certain products and offer payment facilities to buyers who acquire them. If we look at it this way, credit cards are another way of obtaining a loan, since the bank offers us each month a certain amount of money to spend on credit to make purchases of goods and services. These cards allow you to enjoy credit at the moment and reimburse the money used the following month without interest. There is also the option to pay in monthly installments but these would already have a cost that you should consult. Finally, we will highlight the mini credits, which have exceeded the traditional financing methods. These credits are very popular because they are quick and because the process to request them is very simple and agile. You can get them online and you can enjoy your credit in a matter of minutes. The repayment terms are usually 30 days.
What requirements do you need to apply for a loan?
To apply for a loan and grant it to us we must meet certain minimum requirements, which depend on the entity that makes the loan. Although the usual is:
- Have a sufficient income level. When a loan is used to obtain liquidity, it is important to have a good level of income to repay it. In many cases payroll will not be necessary since other payments will also be necessary.
- Provide guarantees. Depending on the credit that we want to request we will have to provide a guarantee, which can be personal, real or from a third party.
- Contract other linked products. Finally, depending on the entity, it is very possible that we are required to contract a linked product to access the loan.
At the time of request and once you meet the minimum requirements these will be the documents you will need to get a credit: identity document, bank statement and a receipt of your income either payroll, unemployment benefit, pension… If you want An online credit in the act simply complete the form and send your application. You must include the following details, along with the required documentation.
- Personal and contact information
- The amount of money you need and the term to amortize the credit
- Your economic and work situation, to contribute your income and expenses
How much does a credit cost us?
If you are going to apply for a loan it is important that you have all the information, such as how much a credit can cost us. Online credits are the order of the day and there are many entities that offer them to us, but what should we know before we sign it? In principle, what will cost us a loan will depend on the interest rate that is applied, and also on the commissions that are included in the product as well as other additional expenses, such as the costs of liaison or notary. Depending on the purpose for which we are going to use the credit, it could also affect the cost of the credits.
The interest rate on the credits
Usually two types are usually distinguished: the fixed and the variable.
- The fixed interest. This percentage is maintained as long as we have the credit, and it is usually the most common in loans with personal guarantee.
- The variable interest. Also known as differential to this percentage must be added the value of a reference index, such as the IRPH or the Euribor.
To know about the interest applied to the credit, the Nominal Interest Rate (NIT) must be taken into account in addition to other indicators to compare the price of the credits. To make it easier, the Annual Equivalent Rate (TAE) will help you to know how much the credit will cost you exactly, since this reflects the TIN and any additional costs.
Among the most common commissions, as in loans, we highlight the following commissions that we can find when hiring them:
- Opening commission. There are always commissions when some procedures are carried out, and in this case the commission will be a percentage of the amount that they will lend us.
- Study commission. Before granting us a credit they will always look for our solvency, and this analysis has a cost that we will have to pay, and that will be from 1% to 3% of the financing. In case you get the credit you do not have to pay.
- Commission for early repayment. If we want to return the credit before the deadline is reached, the entities could claim financial compensation.
- Commission for modification. For the changes in the contract we will also have to pay a remuneration, either to modify or to change the guarantee the lender could demand an additional commission, which will not be reflected in the APR.
In addition to the usual commissions on the credits we must also have the possible associated expenses, such as notary expenses or related products.
What happens if you do not return the credit?
To reimburse the credit you will surely have to do it through monthly installments, and usually through direct debit in a bank account. You will also have the option of returning the credit ahead of time but will charge you a commission, as we have already indicated. If you do not return the credit as indicated in the clauses of the credit agreement, they will notify you of the non-payment and you will have to pay a commission for the claim, and an interest for delay. If you continue without paying, you can enroll in a list of defaulters, such as the financial credit institution. In more extreme cases of non-payment, you may receive a legal claim, and if the complaint prospers, the entity may sentence an asset seizure and claim the guarantee.