Difference Between Loan and Grant

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.

Difference between loan and grant

Meaning

• 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. 
• Grant is a financial assistance given by the government in monetary or non- monetary form. 

Repayment of an amount:

• In a loan, there is repayment of an amount after some time which is predetermined. 
• There is no requirement to pay back a sum of money. 

Interest

• A loan has interest and the rate of interest differs from loan to loan. 
• A grant is free from the interest. 

Sources

• A loan has many sources like it can be taken from the bank, an individual, a firm or any entity. 
• A grant has limited sources like it can be given the government or by the foundation. 

Form of assistance

• A loan is in the form of cash only. 
• A grant may be in the form of cash or any other kind.