Difference Between Loan and Borrow

Loan vs Borrow

Loan and Borrow are two words that are often confused due to some sort of similarity in their meanings. Strictly speaking there is indeed some difference between the two words. The word ‘borrow’ is used with the inner sense of ‘take’, whereas the word ‘loan’ is used with the inner sense of ‘give’. This is the main difference between the two words.

Look at the following sentence:

The financial institution will not let you borrow money unless you have worked in an establishment for about three years.

In the sentence given above the word ‘borrow’ is used in the sense of ‘take’, and hence the meaning of the sentence would be ‘the financial institution will not let you take any money unless you have worked in an establishment for three years’.

Look at the following sentence

The bank granted loans for agriculturists on an agreement.

In the sentence mentioned above the word ‘loan’ is used in the sense of ‘give’ and hence the meaning of the sentence would be ‘the bank gave loans for agriculturists on an agreement’.

Another important difference between the two words is that a loan is given under a condition that it should be repaid within a certain period of time. The time period normally varies as according to the repaying capacity of the person who accepts the loan.

On the other hand, a person borrows money from his friend or his relative sometimes not under any condition. The money is simply lent in good faith that it will be returned duly. Hence there is no binding rule about the return of the money in the case of borrowed money.

Borrowed money may not carry any interest on it. On the other hand a loan always carries some interest on it. In other words the person who accepts the loan should return it along with interest.