Leases and Loans the Difference between Apples and Oranges

By | October 5, 2007

difference between a Lease and LoanNote: Because leasing has such a wide definition, for this article I am specifically talking about lease purchases (where the intent is to purchase the equipment at the end of the term.)

What is the difference between a Lease and Loan? This is a pretty broad topic, but the basics can be covered in a succinct fashion.

Technically…

Equipment Loan: This is where the Lender (the party that is providing the money) is loaning out a specific sum of money to the Buyer (the party that is purchasing the equipment), and the money is applied towards the purchase of a piece of equipment. The Buyer purchases the equipment in their name and the Lender then files a UCC or Lien on the equipment until the agreed upon payments have been made. For example, you want to buy kitchen equipment, so you get short term loans from trust two and buy some, trust two then takes out a lien on your equipment, meansning if you dont pay it belongs to them.

Equipment Lease: This is essentially a rental agreement. The Lender buys the equipment on behalf of the Buyer, and after the agreed upon payments have been made the Buyer then can purchase the equipment for a predetermined residual amount. (Common residuals include $1, 10%, or FMV, which I’ll cover at a later date.)

This means…

In short, the basic difference between a Equipment Loan and a Lease is the ownership of the equipment during the course of the payment plan. Also a Lease by nature has to have some sort of residual at the end of the term.

Go to this website if you want to read about how you can make money by being a good trust deed lender, Payday Loan compensation and refunds. The more you know in the better off you will be after your loans.

Related Articles and Links:
Residuals (various types)

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