What is the difference between deposit and loan

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LTV Ratio. Limitations of the LDR. Key Takeaways The loan-to-deposit ratio is used to assess a bank's liquidity by comparing a bank's total loans to its total deposits for the same period. A loan-to-deposit ratio of percent means a bank loaned one dollar to customers for every dollar received in deposits it received. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

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Thank You for your feedback! Something went wrong. Please try again later. Best Ofs. Banking Reviews. Banking Recommended Reading. More from. If a loan and deposit were synonyms there would be no need for making a difference between them. There is a thin line of difference between a deposit and a loan. Deposits and Loans both include borrowing of money.

We will have to understand the intention of borrowing for deciding whether a receiving of money is a loan or deposit. We will have to understand that Deposit is for the benefit of the Depositor. The Depositor gets benefitted by earning interest. Ordinarily, though not always, in the case of a deposit, it is the depositor who is the prime mover. Whereas, In the case of loan the borrowing is primarily for the benefit of the borrower. The secondary benefit is received by the lender by way of interest.

The other more important distinction is in relation to the obligation to return the amount so received. In the case of a deposit which is payable on demand, the deposit would become payable when a demand is made. In the case of a loan, however, the obligation to repay the amount arises immediately on receipt of the loan. Accepting of Deposit from members is mentioned in Section 73 of Companies Act, A company may accept deposits from its members on such terms and conditions, including the provision of security, if any or for the repayment of such deposits with interest, as may be agreed upon between the company and its members.

A company can accept deposits from members by passing an ordinary resolution and complying with the Companies Acceptance of Deposits rules. A public company may invite deposits from persons other than its members subject to compliance with the requirements provided in sub-section 2 of section 73 and subject to such rules as the Central Government may, in consultation with the Reserve Bank of India, prescribe. The sanctioning of loans can be denied or not approved by the banks but the deposits done by the customers in their accounts cannot be rejected and do not have anything to do with the approval of the bank.

Loans can be short term or long term depending on the duration and capability of the individual whereas deposits are generally long term in nature and can be withdrawn at any given time at the disposition of the individual. The facility provided by any financial institution where any individual or business can avail it for financial assistance.

The facility provided by banks where any individual or business can secure their money along with the interest income.

The loan provided by the banks will have simple or compound interest and time duration based on the type of loan. Certain deposit types will not provide tax benefits to the customer if premature withdrawal is done. The loan should be repaid along with interest for the given time duration. If not, the accumulated amount will increase the repay amount and time duration. After maturity, the deposit amount can be withdrawn.