Do you know what is the difference between money and financing loans? Now there are many alternative loan solutions for customers in need. But if you plan to buy a car, what type of loan will you choose? Do you prefer money or financing loans? Let’s see together what is the difference between money and financing loans.
Know and Know the Difference between Money Loans and Financing
To meet customer requests, credit products or loans are now increasingly varied. Not only loans in the form of money, but there are also loans in the form of financing. Then what is the difference between loan money and financing? In essence, the difference is from the form of loan obtained. In loan money, the loan is in the form of cash and you are free to use it for any purpose. As for financing, you will get a product or item. Through this article, the Guermantes family will describe what is the difference between money and financing loans.
According to Law Number 10 of 1998, credit is the provision of use of money or goods within a certain period of time, based on an agreement or agreement between banks and other parties that requires the borrower to repay the debt with collateral or without collateral, with the provision of services or interest or without interest. In accordance with the origin of the word credit, namely credere which means trust, credit means trust from creditors or loan providers to their debtors or recipients of loans.
The function or purpose of the creation of real credit is to stimulate the activities of mutual assistance between one party and other parties in order to support the achievement of needs, both in the field of business or daily necessities. Credit can be called fulfilling its function if credit has a positive impact on creditors and debtors, as well as for society in general. Basically, some credit goals are:
- Providing bank loans with agreed credit interest.
- Maximizing the use of funds obtained.
- Increase working capital or business.
- Increase payment traffic.
- Improve community welfare.
While the elements contained in the provision of credit facilities are as follows:
- Trust is the belief of the credit provider that the loan will be used and received back within a certain period of time. This element can be achieved by checking the ability of the recipient of the loan to repay the loan for a certain period externally and internally.
- New credit can occur after an element of agreement between the two parties regarding all terms and conditions in the procurement of a loan.
- Duration is an agreed period of loan where at the end of the period, the recipient of the loan is expected to repay the loan with or without interest.
- The element that is certain to exist in the procurement of credit is the element of risk where in the time period there is a risk of credit defaults. This risk can be a deliberate or unintentional risk.
- Reward Services (achievement) is the advantage of giving a credit which is usually in the form of interest or profit sharing.
Financing is an action based on an agreement in which service activities and remuneration occur (achievements and contrasts of achievement) which are separated by time. The term financing means I believe or put trust. Financing has several main objectives or functions, including:
- Looking for profits that aim to obtain results from the financing channeled.
- Security from achievements or facilities provided must be guaranteed so that the objectives of profitability can be achieved without significant obstacles.
- Helping customers’ businesses through provision in the form of financing.
- Assist the government through the development of funds channeled by banks to increase development in various sectors.
Funding is given on the basis of trust in which the achievements given are believed to be given and returned in accordance with the terms and conditions agreed upon.
Based on this basis, some of the elements contained in financing are:
- There are two parties. In financing there are always two parties, namely the giver and recipient of financing.
- Trust is the lender’s belief that the recipient of the loan can return the loan at an agreed period of time with all terms and conditions.
- Elements that guarantee an agreement between the two parties in all financing provisions.
- Time period. The loan repayment period has been discussed and agreed upon by both parties.
- An element that is again an important element in financing, namely the possibility of risks that arise during the financing period.
- Reply Service (achievement). Benefits of a financing commonly known as profit sharing or margin.
In contrast to money loans, financing providers are usually in the form of multifinance companies or leasing .
Which is right for you? Money or Financing Loans?
Based on the explanation above, you certainly have got a brief description of the basic differences between money loans and financing. Now the question is, which of the two should you choose? Before you make a decision, it’s a good idea to compare the two beforehand so you can make the right decision according to your needs.
To find out clearly, let’s summarize the similarities and differences in both briefly:
|1||Provider in general||Bank||Multifinance company or leasing|
|2||Form of loan||Cash||Products or goods|
|3||Profit system||Flower||Profit sharing or margin|
From the differences above, it is known that the basic difference between the two is the form of loan given. In loans the money given is cash and the loan recipient has the freedom to take advantage of the loan for any need while financing provides loans in the form of goods or products. For example, the financing of a car loan recipient will get a car instead of money that can be bought for a car, as well as home financing and so on.
Determine according to your needs
Through the description above, which one will you choose? The decision is entirely in your hands, so consider and compare according to your needs before making a decision. Both have advantages and disadvantages of each and although similar, of course there are differences between the goals and conditions of both.
Do you have questions about the difference in money loans and other financing? Leave your comment below . If you have questions, please submit your question in the column below. Our Financial Planner is ready to help you, thank you.