Banks are increasingly advertising a credit limit, withdrawing from the aggressive promotion of cash loans. What can customers mean to us? Which of the two solutions is more beneficial and can you talk about any alternative at all? In this article, you’ll surely find answers to the most important questions related to the choice between a credit limit and a cash loan.
What is the credit limit?
Credit limit, in principle a revolving loan, because that is the correct name of this product, it is a specific type of cash loan for any purpose. The loan amount is made available in the borrower’s bank account balance and can be used in the same way as all funds on the account.
Reminder – what is a cash loan?
Cash loan – to put it simply, it is a small amount of loan, granted with unmodified formalities and possible to be used for any purpose chosen by the borrower, but it does not have to be accepted by the bank.
Analysis of differences
The first difference that results directly from the name of both products is the renewal of the loan. Cash loan is a one-time use product. The borrower receives a certain amount once at his disposal, and then deals only with the repayment of the loan. After settling all amounts due, the credit agreement automatically expires. In the case of a revolving loan, the fixed amount is available at all times, of course the condition is that the borrower repays the previous loan. Each deposit on the account automatically reduces the amount of debt and increases the amount of the credit balance that can be used.
As for the cost of both solutions, it is more or less similar, however, depending on the offers being compared, one option is more advantageous – each bank has its own rules here and it is difficult to clearly indicate. Banks often use promotional offers, so choosing, you need to know the current proposals of banks to choose the one that is the most advantageous price.
The convenience of using is definitely an indication of a revolving loan. However, I have set up here that you are a disciplined person to take out loans only when your situation permits. A revolving loan creates the threat of increasing the threat of indebtedness just because of the convenience of using – money is always at your disposal – you only need one positive decision to have it always at hand. In the case of cash loans, the convenience is smaller, because you must apply for each loan separately and in the event of a deterioration in your creditworthiness, you simply will not get a loan.
One more thing remains to be considered – the amount of the loan. Due to the aforementioned ease of use, a revolving loan is usually lower than a cash loan. Most banks grant credit limits in the amount of PLN 500, while cash loans for such low amounts are virtually impossible to get. On the other hand – each bank offers a cash loan of PLN 10,000, but getting a credit limit is not an option.
The credit limit and cash loan are products that are not really alternative to each other. There are many differences, and if in your case you can use both forms of financing, their similarity results only from the specificity of your needs. Both the contracts and the operating principles of both products are too different to be considered as alternative solutions and even indicate a universal solution.