Distinguishing Credit Contracts and Loan Contracts

Customers need to clearly understand the differences between a credit contract and a loan contract before signing, as this is crucial. Each type of contract has its own characteristics and terms regarding customer rights and obligations, ensuring fairness in all financial transactions between the involved parties. Let’s explore and distinguish these two types of contracts with PTF through the article below.

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Distinguishing Credit Contracts and Loan Contracts

1. Definition of Credit Contracts and Loan Contracts

1.1. What is a Credit Contract?

A credit contract is a written agreement between two parties, including the lender and the borrower. The lender is a financial company or bank licensed to operate by the State Bank. On the other hand, the borrower is an individual or organization that meets all the lending conditions set by the lender.

According to this agreement, the lender in a credit contract provides a sum of money for the borrower to use within a specific period. In return, the borrower is obligated to repay the principal amount along with the agreed interest.

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1.2. What is a Loan Contract?

A loan contract is a legal agreement between a lender and a borrower, in which the lender provides the borrower with an asset (such as a house, vehicle, or real estate) for a specific period. The borrower is then obligated to return the asset in its original quantity and quality, along with any agreed-upon interest.

2. Subject Matter of Loan Contracts

Understanding the subject matter of credit contracts and loan contracts helps customers grasp the nature of the transaction and comply with the agreed terms. Below are the details regarding the subject matter of these two types of contracts.

2.1. Credit Contract

The subject matter of a credit contract primarily involves the sum of money disbursed by the lender to the borrower. This loan is usually accompanied by conditions related to interest rates, repayment terms, and other clauses designed to protect the interests of both parties.

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2.2. Loan Contract

Unlike a credit contract, the subject matter of a loan contract typically includes goods, real estate, or valuable documents that the borrower needs to use for a specific period.

As a result, a loan contract is often used to transfer ownership of an asset. From the moment the borrower receives the asset, they become its new owner.

3. Rights and Obligations of Parties in the Contract

3.1. Credit Contract

In a credit contract, the rights and obligations of both the lender and the borrower are clearly defined as follows:

Credit Contract	Lender *(Financial company/Bank)*	Borrower *(Individual/Organization)*
Rights	Has the right to request full repayment of the loan (including principal and interest) within the agreed time.	Has the right to receive the loan amount as agreed in the contract.
Rights	Has the right to request the borrower to pay any related fees (if applicable) as per the credit contract agreement.	Has the right to request the lender to provide all relevant information regarding the terms and conditions of the loan clearly.
Obligations	Must disburse the loan amount to the borrower as agreed.	Must repay the full loan amount (including principal and interest) on time.
	Must provide complete and clear information about the terms and conditions of the loan from the beginning.	Must pay interest and other agreed-upon fees (if applicable).
		Must use the loan for the intended purpose specified in the contract.

3.2. Loan Contract

In a loan contract, both the lender and the borrower have rights and obligations, including:

Loan Contract	Lender *(Financial company/Bank)*	Borrower *(Individual/Organization)*
Rights	Has the right to request the borrower to return the borrowed asset on time.	Has the right to use the borrowed asset during the agreed period.
Rights	Has the right to request the borrower to pay interest (if applicable) as agreed in the contract.	Has the right to request the lender to provide an asset that is free of defects or damage.
Obligations	Must transfer the asset to the borrower in the correct quantity specified in the contract.	Must return the borrowed asset on time.
	Must ensure that the asset is not defective or damaged upon transfer (unless otherwise agreed).	Must pay the agreed interest (if applicable).
		Must maintain and preserve the borrowed asset throughout the loan period.

Distinguishing between a credit contract and a loan contract is essential to protecting your rights in financial transactions. If you are looking for a trusted and professional lending partner, PTF - Vietnam’s leading consumer finance company is the right choice for you.