What is a soft credit?

The so-called soft credit is a type of credit where the lender offers the borrower a loan with very favorable conditions for this.

Soft credit conditions

These favorable conditions can be, primarily, two:

  • Low interest rate. Normally, these types of credits offer a interest rate low, which is usually below the interest on market loans. This is obviously appreciated, as it causes fewer costs to be incurred by the borrower.
  • The return periods are longer. They can also offer the advantage of having a repayment period that is longer than the rest of the credits offered in the market. This is an advantage that allows the person to repay the credit in a longer period of time.

Mainly, these are the two conditions that make up soft loans. Now, a soft loan can capture one or two of the previous characteristics, depending on the conditions that the lender imposes.

Characteristics of soft credit

The characteristics that determine whether a loan is a side credit or not are the following:

  • Regarding its main characteristic, we highlight the one that we have been commenting on throughout the previous paragraphs: the favorable conditions offered by this type of credit (low interest rates and long repayment terms)
  • The lender is usually a public financial institution. This is due to the fact that said credits do not seek, primarily the profitability, but offer financial help to those who need it. In other words, financial institutions do not usually offer this type of product, since what they seek with it is profitability, and it is not the main objective of these loans.
  • The main objective of these credits is social. Soft credits usually take the form of subvenciones Covert, since they offer financial aid from public entities to finance projects or anything else.

Leave a Comment