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…
Best Answer
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.