Loan would be great.
But loan deals are different nowadays. It basically means buying the player, just paying in installments, as loan per se is rather expensive and it's a loss if a club decides to skip the deal. This at least goes for 'bigger' players.
In this particular case though, our liability for the loan per se is only 1.5m. With a 5.5m (rumoured) buy back. While you're right, that it's just paying an extra instalment to get a purchase, I'm sure the buying club has to have a clause that protects its interests (for eg. The number of appearances the player will make etc) incase the player fails to live upto billing. For eg. What if we had loaned Isla and not co-owned? I'm pretty sure, Udinese wouldn't have a problem if we didn't buy him out of the loan, purely based on his lack of usage and physical conditioning. I mean stipulations along those lines. It maybe a verbal agreement or an unspoken one that will allow the clubs to sit at the table and take a fair call without ruining trade relations.
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Other sources on TJ say Kolarov is close and is also willing to take a payout to pay at Juve and City have agreed loan terms. This deal however will see light of day when City make a move for another LB. Kolarov will then be released.
My personal favourites in order of preference (based on whose available): 1. Coentrao. 2. Kolarov. 3. Zuniga.