Eight differences between credit and loan
His contract is considered as a credit or a loan may have important legal consequences.
Often the client's main concern is to obtain money.
The question whether the operation by which achieves its objective is called credit or loan, does not "lose sleep". However, the differences are remarkable.
On credit, the financial institution customer makes available a maximum amount of capital, which will be used depending on your needs. In this manner, the customer only pays interest on the funds actually used (plus a commission on the balance available but unwilling).
A loan, the financial institution delivering capital to the borrower, you will have to return within a specified period and the payment of certain interests.
1. In a loan, Customer capital once delivered to home. On credit, it becomes available and returning funds based on customer needs.
2. In a credit, We do not pay interest if you do not have the money. Only interest on money paid and during the time taken. In a loan, to receive capital at the beginning, comes the obligation to pay the agreed interest on the total.
3. El crédito se puede renovar en sucesivas ocasiones. The loan must be repaid within the agreed time. Also, the term of the loans is usually lower than that of loans. In the first duration it is often about one year, while in the second, You can overcome 30 years when mortgage.
4. In the credits, There is a commission on the part of the capital that is available to the client but not used. On loans, no commission for availability.
5. Interest rates are usually higher in the credits on loans.
6. Credits are usually used by professionals and companies with specific cash requirements. The loans are used to finance an acquisition, usually high value, both by companies and consumers.
7. In the loan, we know in advance what it is going to use the funds. On credit, not.
8. With current interest rates, the advantages of the credit facilities were reduced: On the one hand, the availability fee cost much more expensive. Alternatively, as it has been seen during the last crisis, the financial institution can fail to renew its credit facility and send your company directly to a bankruptcy.
But in addition to the differences above, there may be legal consequences for the contract guarantees.
The Third Section of the Audiencia Provincial de Castellón has solved one of these cases Sentence 23 May 2016.
Some customers sign notarized in October 2007 a contract called "Mortgage deed guarantee maximum credit line granted by the Caixa Penedes in favor of Doña Natividad and D. Jose Ignacio". This act, They are appearing well D. Jesus and consorts D. Rogelio and Maria del Pilar, in respect of guarantors / sureties.
In the exhibition I indicated that Caixa Penedes (rear Banco Mare Nostrum) He had agreed with previous "Hiring a current account credit, with the mortgage guarantee referred will be done ".
He expressed that had been granted credit availability to 180,000 €. this amount, It was paid in full in the customer's account and agreed as maturing 23 October 2037. the possibility of further provisions foreseen. The refund would be done by monthly installments of principal and interest.
The ordinary interest was a 5,20% the first year and thereafter, Euribor more 0,95% in the first arrangement. Interest for late payment was set at 19% and early termination clause was established for non-payment of any installment.
To secure payment, mortgage on a housing estate was established pricing purposes auction 270,000 €. This house was valued by the Valuation Society S.A. in 195.795 euros 1 October 2007.
entrenchment clause was established by which: “D. Jesus (….) and consorts Don Rogelio and Maria del Pilar , (…) afianzan tan ampliamente como en derecho sea posible el cumplimiento de las obligaciones contraídas por la parte acreditada en el presente contra to de crédito. (….).
The deposit paid will be valid here, while the outstanding balance of credit, plus the outstanding interest payment, whether ordinary and delay, exceeds 80 % of the appraised value”
Don Jesus filed suit against the bank, asking to be declared extinct bail.
The Court of 1st Instance number 5 Castellon gave judgment dismissing the lawsuit. He considered that the parties contracted a credit and not a loan. In this manner, until the year 2037, they could make new arrangements so it can not be extinguished warranty.
Don Jesus appealed to the Provincial Court, claiming that as much as the contract is denominated credit facility, actually it was a simple loan. Therefore, at the time it was less than debt 80% of the appraised value of the mortgaged property, la fianza debía quedar extinguida.
For Hearing, which was hired was a home equity loan:
• There is a first arrangement of the total amount (180.000€) and subsequent provisions are subject to strict discipline governed by the bank. In a credit, after analyzing the creditworthiness of the customer and the contract signed, successive provisions are made at the discretion of the client (provided that the agreed conditions are met).
• The return is expected by a rigid quota system comprehensive monthly principal and interest, which differs from freedom as available and payment by the customer in a credit.
• The rest of the clauses is the characteristic of a home equity loan (even, with its "ground clause" of 3%).
We have a membership contract between a professional and a consumer, to which the principle applies "When in doubt against forges" enshrined in Articles 1288 C.Civil: "Interpretation of the dark clauses of a contract shall not favor the party that caused the darkness", 6.2 LCGC and 80.2 TR of the Law on Protection of Consumers and Users.
The bond of the applicant, He was subject to a conditions precedent whereby, It is extinguished when the debt had decreased below a 80% of the appraised value.
Produced this fact as indicated by the applicant and not having contributed anything about the financial institution when "For his professional character and for who knows all the economic data of the operation, who she was in better or had more probative facility to quantify them ( art. 217.7 LEC )” , Section concludes that It has fulfilled the condition of bail extintiva.
the appeal is revoked and the sentence appealed.
In summary, the differences between a loan and a credit They are relevant, both between the parties, and even towards third parties.