Lend And Loan- Commonly Confused Words Let’s Go For It

When speaking in a financial conversation there are two words that often confused.  These words are loan and lend.  Even though they sound like they are the same thing the words have two completely different meanings.  This article will explain the difference between the two words and will hopefully clear up any confusion you may or may not have.

What Is A Loan

When speaking of a loan you are generally speaking of a type of a debt.  What this debt will entail is a financial asset that is redistributed over a period of time.  This will involve a lender and a borrower.  The lender is the party who is lending the money to the other person with the intention that they will be repaid with interest.

When involved in a loan the borrower will receive the principal, which is the amount of money being borrowed.  This money will come from the lender.  The borrower of course will be required to pay back the money to the online payday loan lender within a certain time period.  Usually the repayments will be monthly installments.  An installment means that the payment will be the same each time.

Receiving money from a lender is typically not a free transaction.  Most of the time the lender will charge interest.  This is the money that the lender will charge for the use of the money that is being borrowed.

When taking out a loan there will be a contract that should be signed by the borrower and the lender.  This contract should spell out any contractual terms such as the length of the loan, the interest rate as well as the monthly payment amount.

What Is Lending

When speaking of lending we are often referring to the financial institution or individual that is giving the loan to a borrower.  There are many different types of loans that can be given.  There are unsecured loans and secured loans as well as lending on a credit card.

An unsecured loan is a loan where the borrower is given the amount of money being requested on the authority of their signature that they will repay the loan in the given time.  To receive this type of a loan the borrower should have excellent credit but even with a great credit score the interest rate is liable to still be pretty high.  This is because the lender is taking a risk on you as a borrower.

A secured loan is a little different in the fact that the credit score will usually not mean anything to the lender unless of course the score is extremely low.  The reason for this is because when you apply for the loan you will be putting up collateral to secure the loan.  Usually the collateral is some sort of personal property such as a car or a home.  The interest rate on these loans is usually much lower because the lender is not taking as much of a risk because there is collateral involved.


If you are in the market for borrowing money you should remember that as a borrower you would be interested in loans for bad credit not in lending.  These definitions are often confused and should be careful researched before signing any documents.

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