2. LOAN MEANING
A loan is a type of credit vehicle in which a
sum of money is lent to another party in
exchange for future repayment of the value
or principal amount. In many cases, the
lender also adds interest or finance
charges to the principal value, which the
borrower must repay in addition to the
principal balance . Loans may be for a
specific, one-time amount, or they may be
available as an open-ended line of credit
up to a specified limit. Loans come in many
different forms including secured,
unsecured, commercial, and personal
3. ADVANCES
In banking, advances refer to the
funds provided by the banks to
the businesses to fulfill working
capital requirements which are to
be payable within one
year . Advances are a type of
credit facility that should be
repaid within one year as per the
terms, conditions, and norms
issued by the Reserve Bank of
India for lending and also by the
schemes of the concerned bank .
4. LOANS VS ADVANCES
Basis for
Comparison
Loans Advances
Meaning
Funds borrowed by an entity from another entity,
repayable after a specific period carrying interest
rate.
Funds provided by the bank to entities for
fulfilling their short-term requirements.
Term Long-term Short-term
Legal formalities More Less
Security May or may not be secured
Primary security, collateral security, and
guarantees
Repayment Fixed repayment schedule Flexible repayment terms
Interest rates Higher Lower
Presentation title 4
