Steps 2 and 3 usually happen at the same time, AIUI you don't actually have the money in your bank account.
Now, in the general case the "someone else" belongs to another bank. When "you" give them the money, your bank has to fork over a chunk of cash. They actually have to get that cash from somewhere. Either that have loads of spare money, or they have deposits, or they get loans themselves. If they get a loan they pay the loan rate (say the Fed funds rate), if they have deposits they presumably pay less.
On the other hand, if the "someone else" belongs to the same bank, the bank actually still needs to have some (though not as much) cash to support this -- that's the "fractional" in "fractional reserve lending". The loan to you is an asset, the other guy's balance is a liability, but the bank is legally required to have cash to support deposits, not just promises and collateral.
1. You acquire a large debt to the bank,
2. The bank gives you a bunch of money,
3. You give that money to someone else.
Steps 2 and 3 usually happen at the same time, AIUI you don't actually have the money in your bank account.
Now, in the general case the "someone else" belongs to another bank. When "you" give them the money, your bank has to fork over a chunk of cash. They actually have to get that cash from somewhere. Either that have loads of spare money, or they have deposits, or they get loans themselves. If they get a loan they pay the loan rate (say the Fed funds rate), if they have deposits they presumably pay less.
On the other hand, if the "someone else" belongs to the same bank, the bank actually still needs to have some (though not as much) cash to support this -- that's the "fractional" in "fractional reserve lending". The loan to you is an asset, the other guy's balance is a liability, but the bank is legally required to have cash to support deposits, not just promises and collateral.