What is the Difference between Credit and Financing?
There are many examples of the difference between credit and financing that many people still do not know today. Even more so, many people still consider both credit and financing as the same thing because of their utility for earning financial loans.
However, you need to know that credit and financing are two different things. What is the difference between credit and financing?
Through this article, AdIns will share information regarding the differences between credit and financing. In this way, you can understand more about their respective functions by reading about them one by one.
What is Credit?
Credit is a platform for money supply or billing that loanees earn from the loaner in a certain amount of time. Loanees can earn credit with guarantees or not.
Several credit providers also offer loans with or without interest. This particular matter is regulated through the Banking Law No. 10 Year 1998, in which all agreements between loaners and loanees must refer to this particular law.
Credit has helped many people in achieving their particular needs. Usually, people who would like to apply for credit will use loans that they earned for their daily needs or to add their business capital.
If so, who are the ones who provide the credit? In the following explanation, we would explain certain aspects that credit providers must have:
- Credit provider facilities must be able to perform a thorough checkup on the loanees’ capabilities to repay their loans
- Credit provider facilities will only be able to withdraw the loans once the loaner and the loanee have reached a conclusive agreement
- Credit provider facilities will have to seriously consider potential risks that might impact the loanees’ credit process
Read Also: What is Bad Debt and Why It Is Important?
What is Financing?
Financing is a form of loan that loaners can provide for material needs and procurement. Usually, financing involves a third party between the loaner and the loanee, such as a financing provider.
The aforementioned third part is a certain material/asset/service provider. Because of that, you surely have known already who the third party is based on the information above.
For the financing providers, they need to have these qualifications:
- Financing providers are included in multifinance or leasing companies
- Financing providers do not provide financial loans since instead, they provide product or material loans
- Financing providers provide a loan based on trust from the loanee’s reputation as a guarantee for the eventual repayment from the loanee based on the agreement
What is the difference between credit and financing?
After knowing the definitions of each other, have you understood the differences between both? As a conclusion, pay attention to these main points from the explanations above:
- Loan Providers: Credit loan providers usually come from banks, while financing providers come from multifinance or leasing companies
- Form of Loans: Debtors will receive financial loans through credits, while financing providers will provide material or product loans instead
- Profit System: Credit loaners can earn profit from the loanees’ interest rates, while financing providers receive their profit from margin rates
These are the examples of the difference between credit and financing that you need to know so that you will not make mistakes in the future. Apart from that, you can use the mobile customer application from AdIns that you can use to apply for credit based on your house needs!