Difference Between Loan and Grant

November 18, 2017 Share Like Labels: bet

Loan

A loan is a sum of money which is borrowed from the financial institution like a bank by a firm or an individual.
A loan is one kind of agreement in which a money is taken from the lender that is payable after some time at a future date.
So, it is one kind of obligation to pay back in time with the predetermined rate of interest.
A loan can be repaid in equated monthly instalments which cover the whole lump sum amount.
If the borrower takes a loan for any specific purpose then he must qualify certain qualification.

Types of loan

Secured loan

A secured loan is given to the borrower by putting pledges like some asset as collateral like property, car etc.
A mortgage loan is a type of secured loan used by a client.
If in case the client fails to pay the loan amount to the lender, a lender has legal right to possess the collateral security and recover the money.

Unsecured loan

The unsecured loan is the loan which is not secured against any of property of the borrower.
An unsecured loan is available from the financial institutions like banks, NBFCs, and other private institutions.
In the unsecured loan, there is more risk associated with it that means a customer may not pay back an amount.

Grant

A grant is also known as a "subsidies".
Grant is a financial assistance given by the government in monetary or non- monetary form.
A grant is a sum of money given by the government or by an entity to a person.
Gran is either given by the central government, state government or by a foundation to an individual, entity etc.
A grant is funded for the authorized purpose and it is not non-repayable.
A grant does not bear any kind of interest.
A grant requires a lot of formalities to pass from the competent authority; an application must be made to the competent authority.
A grant is an economic aid which is given to benefit the public.

Advantages of loan

1) More opportunities

A loan is offered by many lenders like banks, private lenders or by individuals. So, there is a huge market for getting a loan and fulfil the financial need.

2) More finance

In a loan, a borrower gets more finance based on his credit history, financial statement and ability to replay.

Advantages of grant:

1) No repayment of amount

In a grant, there is no repayment of an amount which is given as a grant by the entity to a person.

2) No interest:

A grant does not bear an interest from the beneficiary, it is interest-free money given as assistance.

3) No risk to the borrower

A borrower has no kind fear or a risk because a grant is not repayable. So, a borrower has no need to put anything as collateral.