Cyclopedia

Direct Loan

Summary

A direct loan is a loan that is extended  by the Federal Government, which holds the loan and collects payments on the interest charged. This is distinct from a “loan guarantee” whereby the Federal Government does not provide a loan but encourages its extension by another entity by guaranteeing the repayment of the loan, or the balance on it, to that entity if the borrower defaults.

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  Section 502 off  the Congressional Budget Act of 1974 (FCRA)

Section 502. Definitions.

(1) The term “direct loan” means a disbursement of funds by the Government to a non-Federal borrower under a contract that requires the repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by another lender and financing arrangements that defer payment for more than 90 days, including the sale of a government^[1] asset on credit terms. The term does not include the acquisition of a federally guaranteed loan in satisfaction of default claims or the price support loans of the Commodity Credit Corporation.

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[1] So in original. The word “government” should be capitalized.

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