Know The Difference Between Credit And Financing – The difference between credit and financing is important you know. In everyday life, there are still many people who do not understand credit and financing so they consider them the same. The Difference Between Credit And Financing can be seen from several factors such as the meaning, purpose, parties involved, and so on. For more details, you can learn what credit and financing are below.
Difference between Credit and Financing
Credit and financing have some basic differences. Based on information from the website of the Financial Services Authority (OJK), the following are the differences between credit and financing:
Credit is a financial/financial facility where individuals and business entities can borrow a certain amount of funds that they will use to buy a product or fulfill their needs. The loan funds will be returned by the borrower (the debtor) within a predetermined period.
Based on the definition of credit according to the Act (UU), banking is a process of providing funds or equivalent claims made through a loan agreement between the bank and the borrower. The borrower should repay the loan within a certain period accompanied by interest. Financing is supported in the form of funding or procurement of certain goods, assets, and services needed by customers.
2. Parties Involved
Credit only involves two parties, namely between the customer as the borrower (the debtor) and financial institutions such as banks as creditors or lenders. Financing involves three parties, namely customers as users of goods/assets/services provided, banks/financial institutions as providers of funds, and vendors/providers of goods/assets and services.
The mechanism in credit is that the customer submits a loan application to the bank/fund provider, then a feasibility analysis will be carried out. After the customer in question is deemed worthy of a loan taking into account the risks, the credit will be disbursed.
Financing uses a mechanism where the customer applies to the goods/assets/services needed then the owner of the funds (banks/non-bank financial institutions) will buy them from vendors to resell to customers. The customer will then pay in cash or installments/credit.
4. Fund Provider
Credit providers are usually conventional banks, rural banks, and pawnshops. In general, financing can be obtained from Islamic banks, financial institutions providing Islamic products, and financing companies.
Although the financing involves three parties in the process, some consist of only two parties. This generally occurs in the type of gold financing carried out at banks or Islamic financial institutions. The same mechanism also applies to the type of financing with a sale and leaseback system known as sale and leaseback.
That’s an explanation of the difference between credit and financing that you can learn. Credit and financing are very important for business development. If you need additional capital to develop your business, you can apply for a loan from an Investee that is licensed and supervised by the Financial Services Authority.
Investee is a bridge that brings together you as a borrower (Borrower) and a lender (Lender). In addition to the easy and fast process, you can get competitive interest rates and fees based on a modern credit-scoring system starting from 1% per month. Register Investree now and grow your business. With this capital, you can develop your business smoothly and optimally.