Differences between credit and loan?

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Sometimes, however much we try to save or keep expenses under control, others arise unexpectedly for which we need to ask for outside help. In these cases, there are a world of possibilities... Is it be better to apply for a loan? Or is it more advisable to establish a line of credit?

These questions are very common. There are many people who often think it is the same thing, but there is a big difference in both that revolves around the availability of money.

A loan provides access to all the requested money at once when the loan is granted. However, credit is usually accessed through a credit card that enables us to use money whenever we need it, subject to the needs and limits we have been assigned.

Therefore, the first thing we must do before choosing one or another option is analyze our need, what we want to cover with that money and how much time we are given to use it.

For example, if you just bought a house and it needs renovating, you usually apply for a loan if your savings are not sufficient. However, if the house you have bought is ready to move into, but buying the furniture is above your means, you can request a credit card and use it gradually to buy the household appliances or furniture you need.

Loans are usually intended to cover a payment whose amount we know in advance, whereas credit is better for occasional expenses or those that arise gradually. In addition, the decision should not only depend on whether you need all the money at once or not, but also on other aspects that require considering, such as interest. With a loan, interest is paid on the entire amount that has been borrowed. On the other hand, with a credit facility, interest is paid only on the money you have used, not on the total amount of money the bank has made available to you.

However, we should take into account that a credit card may have a higher interest rate than a loan. The best thing one can do before applying for a loan is to calculate the conditions using a calculator, such as the one made available by BBVA. It allows you to select the amount you need and the term in which you would like to repay it, and you will be provided the information in just three minutes.

When it comes to repaying, there is also a significant difference between a loan and credit. In a loan, the money is repaid by means of monthly payments, and if you need to access more money, you will have to request a new loan. As for credit, to the extent that you repay it, you can use it again, provided that you do not exceed the limit established by the bank.

As for credit cards, BBVA has a wide range of cards based on the needs of the individual and the use they can give to them, including other additional advantages. For example, the Aqua Máxima card with a return of 10% on the main subscriptions or the Repsol Más Visa Crédito card, which in addition to the line of credit offers discounts associated with fuel consumption.

There are a vast array of options, and it is normal to hesitate when choosing the one that best suits you. But just like with loans, BBVA offers customers a card comparison tool by means of which you can compare all of those that interest you and discover the one that best suits you, all at a glance.

Lastly, before applying for a loan or credit, you must take into account up to how much debt you can take on. If we take on too much debt, we may put our financial health at stake.

We must always keep in mind our borrowing capacity. To find this out, you just have to calculate your monthly income and multiply the result by 0.35. Remember that it is not advisable to allocate more than 35% of the monthly income to cover financial obligations.

By taking into account all these tips and examples, choosing a loan or credit will be a much easier task.