The verb advance describes the act of lending money on the condition that it will be repaid at a later date. When used as a noun, the term advance describes the borrowed money.

In many cases, the borrower is required to pay the lender interest for the advance. However, advances can also be interest-free, as per the loan agreement.

The terms loan and advance are used almost synonymously. The term advance is most often used to describe money which is made available to a borrower on a short-term basis, with the expectation that the borrower has the money to settle the debt, or will have it shortly.

Examples of advances include credit card cash advances, emergency cash advances from travel insurance companies, and money fronted by friends or acquaintances (to cover an unexpected bill, for example).

In Switzerland, the term personal loan is used to describe loans to private individuals by banks and other lending companies.

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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.