Are loans an asset or a liability? This is a question that many ask themselves . Loans are widely used for various uses and generate a debt that must be paid. Faced with this situation, the question arises as to whether the loans are a liability or an asset, something quite normal. In today's post what exactly they are will be explained.
What are assets and liabilities?
The economic language becomes really complex, in fact the terms active and passive often cause confusion. In summary, an asset is considered to be any good that a company or individual owns and that can be converted into money. There are two active types:
Not currents . They are the assets not intended for sales.
The currents . They are all those destined to be sold in less than a year.
Liabilities include all the debts and obligations of a company or an individual, which have originated in past financial transactions. Liabilities can be:
Long or short term. This depends on whether they expire before or after one year.
Non-enforceable or own and enforceable funds. It is the capital of a company, this is not required while the company is in operation.
How are loans applied to finances?
Loans are very useful in the economy, since they allow you to have a certain amount of money on the spot . Thus, companies can deal with certain movements quickly. However, the counterpart of this operation is that the amount borrowed and an interest on the money will have to be repaid.
Lenders are responsible for delivering the money and the borrower is the one who receives it . It is also the person who agrees to return the money plus interest within an agreed term. The return is made in installments, which can be monthly, quarterly or semi-annual. In this way, you can deal with unexpected expenses quickly and pay back the money little by little.
Are loans an asset or a liability?
Depending on the point of view they are active and passive . For the lender, the loan is an asset, since it will receive interest on the money borrowed. For its part, for the borrower it is a liability, since it has contracted an obligation that must be replaced. In addition, these are callable liabilities, which act in the short or long term. In this way, the question is fully resolved.
The answer to yes Are loans an asset or a liability? It is determined according to the figure represented in the financial agreement. There is an increasing opportunity to find lenders making their assets available to those who are illiquid. Ideal Loans is a loan comparator that is responsible for obtaining the best financing according to the needs of each borrower.