Are the 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. Given this situation, the question arises whether they are a liability or an asset, something quite normal. Today’s post will show exactly what they are.
What are assets and liabilities?
The economic language becomes really complex, in fact, the terms active and passive often cause confusion. In summary, it is considered an asset to everything that a company or an individual owns and that can be converted into money. There are two active types:
Not current. They are assets not intended for sales.
The currents are all those destined to be sold in less than a year.
Liabilities encompass all debts and obligations of a company or an individual, which have originated from 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. This is the capital of a company, this is not required while the company is in operation.
How do loans apply to finance?
Loans are very useful in the economy since they allow you to have a certain amount of money on the spot. Thus, companies can cope with certain movements quickly. However, the counterpart of this operation is that the amount borrowed and interest on the money will have to be repaid.
The 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 in an agreed term. The refund is made in installments, which can be monthly, quarterly or semi-annual. In this way, you can face expenses incurred quickly and return the money little by little.
Are the 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, as it will receive interest for the money borrowed. For its part, for the borrower, it is a liability, since it has contracted an obligation that it must replace. In addition, these are enforceable liabilities, which act in the short or long term. In this way, the question is completely resolved.
The answer to yes is 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 by making their assets available to those who lack liquidity. Ideal Loans is a loan comparator that is in charge of obtaining the best financing according to the needs of each borrower.