loan
A loan is a form of debt where one party agrees to lend money to another. While generally synonymous with debt, debt covers any amount owed to another, whereas a loan refers specifically to an agreement where one party lends to another.
Loans and debt generally share the same characteristics. They are composed of principal and interest . They both can vary, among other factors, by principal amount, interest rate, maturity , and the frequency by which interest is compounded. Additional terms in a loan, for example collateral or what happens when the borrower defaults , may be negotiated in a lending agreement.
[Last reviewed in September of 2021 by the Wex Definitions Team ]
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