In basic finance terminology, a person or institution that loans money to others is called what?

Introduction / Context:
Understanding basic roles in a financial transaction is fundamental for all finance, banking and business interviews. When money is borrowed and repaid with interest, two main parties are involved. One party provides the funds, while the other receives them and promises repayment. Knowing the correct names for these roles is essential for interpreting loan agreements, credit contracts and many exam questions related to financial markets and instruments.

Given Data / Assumptions:

• There is a loan transaction involving two main parties and possibly intermediaries.
• One party supplies funds to another party for a period of time.
• The receiving party is expected to repay the principal amount and, usually, interest.
• The question asks specifically for the term used for the party that provides or advances the money.

Concept / Approach:
In finance, the party that provides funds is called the lender, and the party that receives funds is the borrower. This terminology applies whether the transaction is a bank loan, a personal loan, or even a bond where investors lend money to an issuer. Other related terms, such as investor, investee and guarantor, have different meanings. Using correct terms helps avoid confusion when discussing who owes whom and who bears which type of risk in a transaction.

Step-by-Step Solution:
Step 1: Identify which direction the money is moving. The party sending or providing the money is the one we are naming. Step 2: Recall that in standard loan terminology, the provider of funds is termed the lender. Step 3: The party receiving the money, who has an obligation to repay, is called the borrower, so this is not the answer to the question. Step 4: Recognise that terms like investee and investor relate to investments and ownership, rather than simple lending and borrowing in a credit contract. Step 5: Conclude that the correct label for someone who loans money is lender.

Verification / Alternative check:
Consider a typical bank loan scenario. A bank provides Rs 500,000 to a customer to buy a car. The bank gives the funds today and expects repayment with interest over several years. In this relationship, the bank is the lender and the customer is the borrower. This same logic applies to many contexts, including private lending between individuals, microfinance institutions and credit card companies. The pattern is consistent: the provider of funds is always the lender.

Why Other Options Are Wrong:
Option B, borrower, is the opposite role: the person or institution that receives money and must repay it. Option C, investee, usually refers to a company or project that receives investment capital, often in exchange for equity, not a pure lending relationship. Option D, investor, is a broader term for someone who invests capital, often in shares or other assets, and is not limited to loan structures. Option E, guarantor, refers to a third party who promises to pay if the borrower defaults, which again is a different role. None of these correctly describe the party that directly loans money in a credit transaction.

Common Pitfalls:
A common confusion in early finance learning is mixing up lender with investor or assuming that both terms are interchangeable. While a bond investor does effectively lend money to an issuer, the technical term in a simple loan context between two parties remains lender. Also, some students reverse roles because they imagine the person needing money is more important. In exams, always focus on the direction of cash flow and legal obligation: the entity advancing funds is the lender, and the entity obligated to repay is the borrower.

Final Answer:
In basic finance terminology, a person or institution that loans money to others is called a lender.