A contact is the person or business on the other side of your money — who you lent to, who you owe, who you bought from.

Naming one turns scattered entries into a relationship. Every transaction, loan and credit purchase tagged to a contact is gathered under them, so you can answer "how much has actually passed between us?" without hunting through months of records.

A loan always has one, because a loan without a counterparty is not a loan. On transactions and credit purchases it is optional — use it where knowing the other party matters later.