loan
Loan refers to an agreement in which one party provides money to another with the expectation that the money will be repaid, usually with interest. A loan is a specific form of debt. While debt broadly refers to any obligation owed, a loan arises from a lending arrangement in which funds are advanced under agreed-upon terms.
Loans typically involve several components. The principal is the amount borrowed, and interest is the amount charged for the use of that money over time. Loans may also vary based on factors such as the interest rate, the length of time for repayment, and how frequently interest is calculated or compounded.
Additional terms may be included in a loan agreement, such as whether the loan is secured by collateral and what consequences follow if the borrower defaults or fails to repay as agreed. These terms are usually set out in a written lending agreement and depend on the nature of the transaction and the applicable laws.
[Last reviewed in February of 2026 by the Wex Definitions Team]
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