ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -While a loan provides all the money requested in one go at the time it is issued, in the case of a credit, the bank provides the customer with an amount of money, which can be used as required, using the entire amount borrowed, part of it or none at all.

Detailed explanation-2: -A loan can be considered as a debit balance when the loan is given out by the business while it can be considered as a credit balance when it is taken by the business. Also read: MCQs on Trial Balance.

Detailed explanation-3: -Despite the way “loan” and “borrow” often are used, they have different meanings and can’t be used interchangeably. Here’s an easy way to remember the difference: “Borrow” means to take, and “loan” means to give.

Detailed explanation-4: -Credit money is the creation of monetary value through the establishment of future claims, obligations, or debts. These claims or debts can be transferred to other parties in exchange for the value embodied in these claims. Fractional reserve banking is a common way that credit money is introduced in modern economies.