What is a bank credit? Definition
A bank credit is when a person or company receives money from a financial entity, both public and private, this credit is usually granted by banks or similar entities. These entities capture money from their customers through passive operations and then lend the money at higher rates, in the so-called “active operations”.
There are different types of bank loans : commercial loans, mortgage loans and consumer loans.
How do bank credits work?
In the credits the entities lend money to their clients when they prove their solvency through income accreditation or property accreditation. But not anyone can have access to a bank loan, for this we must meet certain requirements (adequate business and credit history). This credit will be returned gradually (different installments) or in a single payment.
Bank loans are widely used by companies to finance their new projects or continue their expansion. But as we have commented, individuals can also do it. It is an interesting treatment for both parties, since the bank or financial entity receives the interest for the use of the money and the client receives money for their expenses or unforeseen expenses.
Difference between loans and bank credits
In banks or banking entities we can or get money through loans or bank credits . The main difference is that in the loans the delivery of money is a fixed sum and on that sum they will pay the interest that we can return with the capital or separately.
On the other hand, in bank loans we have certain amounts of money, depending on our ability to pay in the future. Although we have a certain amount of money available, it is not necessary to use all this money, being able to have only one part. Then interest will only be paid for the sums we actually use. If we use an amount greater than that available, we must pay additional interest.
We also invite you to discover our article on What is a line of credit?
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