AskDefine | Define loan

Dictionary Definition



1 the temporary provision of money (usually at interest)
2 a word borrowed from another language; e.g. `blitz' is a German word borrowed into modern English [syn: loanword] v : give temporarily; let have for a limited time; "I will lend you my car"; "loan me some money" [syn: lend] [ant: borrow]

User Contributed Dictionary



Middle English from Old Norse lán, akin to Old English læn



  1. A sum of money or other valuables or consideration which 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). Occasionally collateral is required to assure that the borrower repays his or her debt or returns the consideration thus loaned. Most loans require some sort of positive (or at least a lack of negative) credit to be established by the borrower first.
    He got a five grand loan.
  2. The contract and array of legal and/or ethical obligations surrounding a loan. He made a payment on his loan.
  3. The permission to borrow any item.
    Thank you for the loan of your lawn mower.


borrowed sum of money or other valuables
contract and array of legal and/or ethical obligations surrounding a loan
permission to borrow any item


  1. To lend. This usage is confined to the US (or perhaps parts thereof) and elsewhere is ungrammatical (loan being the noun, and lend the verb).
    2006: When you loan somebody something, they have the responsibility to safeguard it. — Judge Judy (unidentified episode, but frequently heard from her as a verb)


to lend

Derived terms




Extensive Definition

A loan is a type of debt. All material things can be lent; this article, however, focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.

Types of loans


A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
A type of loan especially used in limited partnership agreements is the recourse note.
A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.


Unsecured loans are monetary loans that are not secured against the borrowers assets. These may be available from financial institutions under many different guises or marketing packages:
The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

Abuses in lending

Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorised, it could be considered a loan shark.
Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organisations of lending at usurious interest rates and making money out of frivolous "extra charges".
Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

United States taxes

Most of the basic rules governing how loans are handled for tax purposes in the United States are uncodified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations — another set of rules that interpret the Internal Revenue Code). Yet such rules are universally accepted.
1. A loan is not gross income to the borrower. Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth.
2. The lender may not deduct the amount of the loan. The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment). Deductions are not typically available when an outlay serves to create a new or different asset.
3. The amount paid to satisfy the loan obligation is not deductible by the borrower.
4. Repayment of the loan is not gross income to the lender. In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender.
5. Interest paid to the lender is included in the lender’s gross income. Interest paid represents compensation for the use of the lender’s money or property and thus represents profit or an accession to wealth to the lender. Interest income can be attributed to lenders even if the lender doesn’t charge a minimum amount of interest.
6. Interest paid to the lender may be deductible by the borrower. In general, interest paid in connection with the borrower’s business activity is deductible, while interest paid on personal loans are not deductible. The major exception here is interest paid on a home mortgage.

Income from discharge of indebtedness

Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness. ''' Thus, if a debt is discharged, then the borrower essentially has received income equal to the amount of the indebtedness. The Internal Revenue Code lists “Income from Discharge of Indebtedness” in Section 62(a)(12) as a source of gross income.
Example: X owes Y $50,000. If Y discharges the indebtedness, then X no longer owes Y $50,000. For purposes of calculating income, this should be treated the same way as if Y gave X $50,000.
For a more detailed description of the “discharge of indebtedness”, look at Section 108 (Cancellation of Debt (COD) Income) of the Internal Revenue Code.'''


loan in Bulgarian: Кредитиране
loan in Danish: Lån
loan in German: Darlehen
loan in Estonian: Laenuleping
loan in Spanish: Empréstito
loan in Spanish: Mutuo
loan in French: Emprunt (finance)
loan in Indonesian: Pinjaman
loan in Italian: Mutuo
loan in Hebrew: הלוואה
loan in Dutch: Lening
loan in Japanese: 融資
loan in Polish: Pożyczka
loan in Portuguese: Empréstimo
loan in Russian: Заём
loan in Finnish: Laina
loan in Swedish: Lån
loan in Yiddish: באָרג
loan in Chinese: 贷款

Synonyms, Antonyms and Related Words

Wall Street loan, accommodate with, accommodation, advance, allow, allowance, call loan, call money, collateral loan, credit, demand loan, external loan, float a loan, foreign loan, lease-lend, lend, lend-lease, loan-shark, long-term loan, negotiate a loan, policy loan, secured loan, short-term loan, time loan, unsecured loan
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