A loan is a monetary amount provided to a borrower by a lender, which the borrower is obligated to repay along with interest. The purpose of a loan is to enable individuals or businesses to utilize capital for investments or operations by borrowing money from banks. In addition to banks, there are other financial and non-financial institutions that are explained later in the paper. Loans are categorized into short-term (up to one year), long-term (over one year), and medium-term loans. Examples of short-term loans include discount loans, acceptance loans, overdraft loans, lombard loans, and other types. Long-term loans include project loans, mortgage loans, investment loans, and others. There are also bridging loans, large loans, fiduciary loans, and other types. Credit risk refers to the likelihood that a borrower will not meet their obligations, and banks mitigate this risk by requiring collateral, which serves as a security for loan repayment. Collateral is a secondary source of loan repayment, while the borrower’s income is the primary source. The aim of this paper is to provide a more detailed understanding of long-term and short-term loans and their usage. Additionally, it includes an analysis of the indebtedness of citizens and business entities in the Republic of Croatia, which reveals significant data indicating poor financial conditions. It concludes that both citizens and businesses are heavily indebted, pointing to low financial capacity, low wages, and a high demand for financing from banks.