In general terms loans and debts are synonyms for liabilities. When you look at a balance sheet of a company, at the left side of the balance-sheet (liability side) below the heads like share capital, reserves etc. you may find a head ‘loans and debts’ where the company shows the money raised by it by way of loans,debentures, bonds etc. Hence, it is clear that loans and debt taken together are considered as liability of the company which has to be repaid by the company at a future date.Basically, there is no major difference between loan and debt, all loans are part of a large debt.The money borrowed by an entity requires to be paid off in both the cases. However, they are distinguished on the ground of nature of liability, tenure and repayment system etc.
When an individual or a company borrows money from a money lender/bank/financial institution to meet personal or business requirements, it is called loan. However,in the cases of companies, they may borrow money for expanding its capital needs to purchase plants and machinery etc. The companies have choices that they may either go for loans from banks and financial instituions, or issue bonds,debentures or even issue equity shares to general public.The money borrowed through issuance of bonds and debentures to public is considered as debts.In the simple words, money borrowed from a lender is a loan and the money raised through bonds, debentures etc. is the debt. Another major difference is that the money borrowed through loans are normally required to be repaid in installments along with the interest charged whereas in the cases of bonds and debentures, the company pays only interest at regular intervals and only on maturity of the debt instruments it will repay the principal amount.
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