A loan is money that someone borrows and promises to pay back later, usually with extra money added called interest. When you take out a loan from a bank to buy a house, the bank gives you the money now, and you pay it back gradually over many years, plus interest as a fee for borrowing.

People and businesses use loans for things they can't afford to pay for all at once: a car, college tuition, or starting a business. The borrower signs an agreement promising to repay the money by a certain time. If you loan your friend five dollars for lunch, you're making a simple loan with the expectation that they'll pay you back.

Banks and other lenders earn money by charging interest on loans. If you borrow $100 at 10% interest for a year, you'll owe $110 when you pay it back. The interest rate and repayment terms vary depending on the type of loan and the borrower's trustworthiness.

The phrase on loan describes something temporarily borrowed, like when a museum has a painting on loan from another museum. Libraries loan books to readers. Being willing to loan something shows trust, while paying back a loan on time shows responsibility and builds trust in return.