The number of Italian families that choose to apply for a personal loan to finance and carry out their projects is growing. In particular, 11% of Italians opt for opening a credit line on a current account. Bank credit is a credit instrument offered by banks to their current account holders – both private individuals and businesses – which allows for having a sum of extra money to be used when the liquidity available on the current account ends. The amount of the credit line is established by the credit institution based on the income and asset situation of the customer .
The credit line envisages a repayment plan – with well-defined timing and deadlines – and the application of interest rates with values higher than those applied to other financing solutions. In case of prolonged periods of overdraft on the current account, penalties are also applied.
But what is the difference between bank credit and loan ? And what are the conditions to request them?
Why apply for a credit line?
The credit line, also known as “custody” and represents a particular loan solution is based on the commitment that a bank assumes putting a sum available to the client. Condition to request this type of financing is the fact that the client in question must be the holder of a current account at the bank where they decide to request the loan.
A credit line may be requested both by a company and by a private individual and once the application for a concession has been sent, the credit institution initiates a preliminary investigation to assess whether the income and financial profile of the applicant is in line with the bank’s requirements. to fix the ability to repay the credit granted ( income profile ) and financial soundness ( equity profile ). With regard to the amount of the loan, the customer can propose an indicative quota but in the last instance it is the credit institution that decides the final sum chosen based on the income and patrimonial condition of the client.
In the case of the loan, the capital placed at the disposal of the applicant does not necessarily have to be used in full and the loan can go to the bank account up to the amount of the credit.
With regard to bank credit, the interest will therefore be calculated only on the part used of the sum requested from the bank.
Bank credit is generally required by private individuals to manage ordinary expenses, while it is often required by small and medium-sized enterprises to maintain the balance between income and expenses in the face of monthly current expenses (utilities, salaries, payment of suppliers, delays by the customers).
What is a bank loan?
Under the wording of a bank loan , on the other hand, is the general category (which also includes bank credit) of the loans, or of the sums of money that a credit institution or a financial company grants to a specific subject.
Generally the bank loan is paid at a fixed interest rate and the repayment of the loaned capital takes place through a more or less flexible installment system according to the conditions reported in the loan contract.
There can be three sub-categories of the loan: personal loan , business loan and community loan depending on whether the borrower is a private individual, a company or, in the latter case, if managed by the European Commission. The loan can also be finalized or not finalized , or when it is requested in cases where you need sudden liquidity to deal with urgent expenses such as the purchase of goods and / or services.
Finally, in general those who want to apply for a loan must:
- be between the ages of 18 and 70 ;
- have a demonstrable income or, alternatively, provide the bank with a personal guarantee such as the signature of a guarantor;
- have a positive credit profile , which means you may not have been a bad payer in the past.
Difference between credit and loan: advantages and disadvantages
In summary, the loan is a share of money that must be repaid by the applicant to the bank through installments characterized by both capital and interest.
Conversely, bank credit is a share of money that differs from Loanca Yern in that it is generally used not to finance or invest an asset but to manage ordinary expenses precisely and because the client does not necessarily have to use the entire sum of the credit and, in this way, the interests are calculated only on the part actually used.
Finally, while the amount of the loan is fixed by the client, that of the credit line is always established by the credit institution.