(CNBNews)(January 11, 2021)--We all know the words loan and borrowing. Many of us use them interchangeably in our daily lives, never once realizing the stark difference inherent to the two. Sure, not all of us can be financial gurus, but it’s always better to know something and not use it than the opposite.
Times are hard. The Covid-19 pandemic has decimated the job market. Experts aren’t sure when it’ll recover. As such, it’s best to understand how these two concepts work. If you should need to take a loan or borrow some money, you need to know exactly what you’re getting into.
In this article, we will go through five main differences between loans and borrowing. Let’s get started.
The most basic difference begins in the very definition of the words. To borrow something means to take. It is a verb. It signifies taking action on the part of the borrower. To loan means to give. It acts as a common noun or as an object of a verb in the sentences it is used in.
For example, take the following sentence: I want to borrow some milk. Here, borrow accompanies want, signifying the need for something. We are asking for some milk. In response, we may say: I have loaned you some milk. To loan means to give, as is evidenced here.
2. Intent and Conditions
Now we get to the nitty-gritty of it. Loans require intent on the part of the borrower, as well as from the lender. You need to qualify your need for a loan (education, to buy a house), and the financial institution can grant it to you. However, you have to pay back the amount within a specific period.
In contrast, you can borrow money from a friend or a family member. This money is given in good faith because you know the person you’re borrowing from and don’t need to carry a payment deadline strictly.
If you take a loan, you have to not only pay back the principal amount but also pay interest on top of it. Moneylenders may also charge interest. In contrast, money borrowed from friends and relations may not have any interest attached to it all.
To get a loan, you need to present documents like proof of residence, age, etc. This is mainly for security reasons and to gauge whether you’re likely to repay your loan or disappear. The requirement to borrow some money is to have a good relationship with the lender.
5. Application and Processing
Getting a loan is an official process. You have to present your details, then apply, and then wait for it to process before you can get your money. It takes a lot of time, which, in emergency situations, you might not have. Borrowing money only takes as long as the lender handing you the money.
As you can see, bowling and getting loans are two very different things, and you should look into it more before deciding. If you have questions or would like to know more about loans, feel free to contact Payday Depot. Professionals are always ready to provide free consultations.