We are drafting a formal document. I saw somebody replace all occurrences of the word credit to loan. There is no specific meaning assigned to either of these words within the document.

Is there any difference between these? I was using them interchangeably.

EDIT: (Some examples due to massive downvote)

  • The interest rate to be applied to the loans/credits shall be determined.
  • For credits/loans disbursed in any foreign currency...
  • In the event the Client uses the loan/credit from the Bank's branches outside Germany...
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    Please edit question and include the core parts of a couple of examples from the document. – James Waldby - jwpat7 Mar 18 '13 at 15:38

In my experience as an economist, I would say that extending credit to someone grants them the ability to borrow, while a loan is actually the act of borrowing. If a bank gives me a $500 line of credit, I can, at some date in the future when I want to, borrow money from them. If a bank gives me a $500 loan, I take possession of them money today.

  • Hi, but getting a loan merely signifies the loan being sanctioned on our name right? and then it depends on us when do we actually use the loan or not use the loan at all? So if a bank gives me a loan of $500, that means the bank has sanctioned me to borrow $500 from them, and I can withdraw that amount using a check or transfer to my actual account or by other means. But If I choose, I don't even have to actually ever touch that sanctioned money. right? – camelbrush Mar 18 '13 at 16:58
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    getting approved for a loan, yes, but getting a loan means you actually receive the money. Getting credit, on the other hand, is more like getting approved for a loan. – Daniel Lawson Mar 18 '13 at 23:44
  • Thats better. Here is another source to support you: investopedia.com/terms/l/loan.asp – camelbrush Mar 19 '13 at 1:24

When talking in financial terms, a loan is usually followed by an interest on the amount unlike credit, which might or might not be followed by an interest.

Definition of credit 1 [mass noun]

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

Definition of loan [noun]

a thing that is borrowed, especially a sum of money that is expected to be paid back with interest

  • Please include source of defs in your answer – preferably links to specific entries instead of generic, eg loan instead of oxforddictionaries.com – James Waldby - jwpat7 Mar 18 '13 at 15:39
  • sorry forgot to mention the sources, just edited em in. Thanks for pointing it out. – camelbrush Mar 18 '13 at 15:40
  • @camelbrush Please link to the actual definitions rather than to the dictionary's homepage. – coleopterist Mar 18 '13 at 15:41
  • added links to the words' definitions. – camelbrush Mar 18 '13 at 16:28

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