Debt vs. Loan

By Jaxson

Main Difference

The main difference between Debt and Loan is that the Debt is a deferred payment, or series of payments, that is owed in the future and Loan is a transfer of money that must be repaid

  • Debt

    Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. The term can also be used metaphorically to cover moral obligations and other interactions not based on economic value. For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a “debt of gratitude” to the second person.

  • Loan

    In finance, a loan is the lending of money from one individual, organization or entity to another individual, organization or entity. A loan is a debt provided by an organization or individual to another entity at an interest rate, and evidenced by a promissory note which specifies, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower.

    In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time.

    The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.

    Acting as a provider of loans is one of the principal tasks for financial institutions such as banks and credit card companies. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.

  • Debt (noun)

    An action, state of mind, or object one has an obligation to perform for another, adopt toward another, or give to another.

  • Debt (noun)

    The state or condition of owing something to another.

    “I am in your debt.”

  • Debt (noun)

    Money that one person or entity owes or is required to pay to another, generally as a result of a loan or other financial transaction.

  • Debt (noun)

    An action at law to recover a certain specified sum of money alleged to be due.

  • Loan (noun)

    A sum of money or other valuables or consideration that an individual, group or other legal entity borrows from another individual, group or legal entity (the latter often being a financial institution) with the condition that it be returned or repaid at a later date (sometimes with interest).

    “He got a loan of five thousand pounds.”

    “All loans from the library, whether books or audio material, must be returned within two weeks.”

  • Loan (noun)

    The contract and array of legal or ethical obligations surrounding a loan.

    “He made a payment on his loan.”

  • Loan (noun)

    The permission to borrow any item.

    “Thank you for the loan of your lawn mower.”

  • Loan (noun)

    A lonnen.

  • Loan (verb)

    To lend (something) to (someone).


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