Payday Loan and Cash Loan Basic Differences

Payday loan and cash loan – basic differences. A bank cash loan and a bank / non-bank cash loan are not the same, although both terms are very often used interchangeably.

I intend to borrow cash, take a loan in a bank for any purpose (!) Or loan in a loan company (!). We do not wonder if we correctly use deadlines, because basically we mean one thing: borrow money. But does the loan and loan mean the same? They are different concepts. So what is a loan and what is a loan?

Check it out:

  • payday loans in banks
  • cash loans in banks
  • cash loans in loan companies

What is a loan?

What is a loan?

A loan is a bilateral agreement in which one party to such a contract is a bank or Credit Unions and the borrower is the other party. Granting loans is a literal banking activity (i.e. it can only be carried out by banks), but … there is one but: regulations may give the possibility of granting loans to another entity (example of Credit Unions).

The object of the loan is always money, which the bank undertakes to make available to the borrower for a specified period of time and at the same time for the set purpose.

The borrower is obliged to use the funds received in accordance with the terms of the loan agreement, return of the received funds along with interest (payment of the commission for the loan granted) on the repayment dates established by the credit agreement.

The loan agreement should be in writing and contain certain elements specified in the act. First of all, they should be:

  • the parties to the credit agreement
  • amount and currency of the loan
  • the purpose for which the loan is to be used
  • loan repayment rules
  • credit repayment date
  • the interest rate (additionally, the terms of its change
  • methods of securing payment
  • conditions of making changes to the contract
  • terms of termination of the contract

Do you only pay interest on loan costs? No. This is the sum of all costs that the borrower has to incur with the loan: interest (interest rate), commission, loan margin, insurance, etc.

What is a payday loan?

What is a payday loan?

The loan differs significantly from the loan. It involves borrowing by the institution (this can be, for example, a bank, but also a loan company) or a natural person, a borrower, a certain sum of money or specific items. The object of the loan must belong to the lender.

In the case of loans, its basic aspects are regulated by the Act of April 23, 1964. In the case when the object of the loan is cash, it is not necessary to specify the purpose (as it is in the case of a loan), for which such funds will be spent.

The loan may be granted for a definite or indefinite period, against payment or free of charge (no interest, commission or other fees are charged, as is the case with loans), there is no requirement to enter into a written loan agreement (the Civil Code, however, indicates in the case of cash loans over € 500, the contract should be made in writing). So let’s remember that the so-called “Loans” offered by loan companies are not loans, but it is only a marketing operation.

Basic differences between a payday loan and a loan

Basic differences between a payday loan and a loan

In summary, there are several basic differences between a loan and a loan.

Legal regulation: 1) a bank loan is governed by the Banking Law, the Act of 29 August 1997 (Journal of Laws of 2012, item 1376 as amended); 2) loan – Civil Code, the Act of April 23, 1964 (Journal of Laws 1964 No. 16 item 93).

In the case of a loan agreement, the subject of such agreement is only cash. In the case of a loan, it can be both money and items (they must be labeled as to the genre).

The lender can be practically any person who owns the borrowed money or items (you can not borrow items or money from third parties). Loans, on the other hand, are granted by banks and Credit Unions from accumulated deposits.

A cash loan may be used for any purpose, the loan is granted for a specific purpose specified in the contract. The cash placed at the borrower’s disposal is not his property, as is the case with a loan. In the case of a loan, the contract should be concluded in writing, and in the case of a loan only if the contract amounts to more than € 500.

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