Loan

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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 updated in September of 2021 by the Wex Definitions Team]