Loans – bank or private entity?
However, there is also another difference to be taken into account, and that is that the amounts of money borrowed are sometimes much lower than those that a bank would lend, the interest payable to private lending companies are higher, given the risk that they run for possible defaults, and that the money has to be returned in a short period of time, sometimes days or a month. Depending on the amount borrowed and the type of client, it is possible to pay through monthly installments, although they will never be as extensive as those agreed with a bank.
Each entity has its advantages . Requesting money from a bank can be cheaper, but it can take more time and difficulties since they grant loans and credits to clients whose solvency can be demonstrated through payroll. If they also have properties, it will be easier for them to access their financial products.
However, banks do not grant credits or loans to people who are included in a list of defaulters, and many private equity companies do grant them , provided that the debt has not been incurred by any financial product of any type of entity and does not exceed an amount stipulated by them. For some companies, the maximum amount that could give rise to the debt is 1,000 euros, others establish up to a maximum of 2,500 euros.
Also, the amount of money that needs to be asked for must be considered. It is advisable not to request more money than is needed , since that amount must be returned together with the interest that accrues, so, in more quantity, more interest.
Banks lend money, usually, from an amount of 1,000 euros, however, private equity companies do it from 50 euros, even some lend less money. Of course, it must be borne in mind that when the amounts loaned are small, the return time is also short , being a maximum of 30 days, and that, together with it, the agreed interest must be paid.
Difference between loan and credit
A loan and a credit are different financial products. At the moment of requesting money from an entity, it is necessary to take into account what type of product we need and what conditions are best for each specific situation.
The loan. It is a quantity of money that a financial institution, be it a bank or a private equity company, lends to its client. This money is delivered in its entirety and is usually used for high expenses, such as buying a vehicle or carrying out a project in the case of entrepreneurs.
The interest is fixed on the total of the loaned money and is returned in monthly installments. When applying for a loan to the bank, it will be necessary to explain what the money is going to be used for, while, generally, private equity companies do not ask for explanations about the destination of the borrowed amount.
However, the interest is higher with private companies and the shorter return time, although, on the other hand, it is easier to access a loan with a private entity than with a bank, since the former request less requirements to lend money.
Credit. A credit is an amount of money, less than that which is granted with a loan, that a financial institution makes available to its customers. The interest is calculated based on the money used , but is higher than the amount stipulated in the loan. The amount of money granted in the credit can be used or not, in the case of private equity companies can grant an amount of money and the client only request a small part of that money; in this way, it will only pay the interest of the amount that has been lent to it.
The banks, and also some private equity companies, have credit cards that they make available to their clients so that they have money at the time they need it. Usually, credit cards have two types of interest, one is paid for the money used and the other, lower, by the fact of having a specific amount of money. Maintenance fees must also be paid.
Credits and quick loans . They are amounts of money that private equity companies make available to their clients. The money can be received in the customer’s bank account within a few minutes or hours, always taking into account if the bank with which the lender works is the same as the bank’s customer’s account, from which it must be the holder to apply for a loan or credit.
In the same way that money is received quickly , it is also necessary to return it within a short period of time , which will be stipulated based on the quantity and type of financial product granted.