What is the Difference Between Government Grants and Loans?

Tricia Christensen
Tricia Christensen

Many different countries have evolved financial help methods for citizens or businesses in need of extra money. This money usually has to be desired for expanding or starting businesses, accomplishing research, or getting an education. The money available for such purposes takes the form of government grants and loans. These have key variations that are worth understanding. Among them are payback structure and ways to apply.

Repayment on student loans generally begins shortly after graduation.
Repayment on student loans generally begins shortly after graduation.

The chief difference, in most circumstances, between government grants and loans is that most grants do not require repayment. This is not always the case. Some people may qualify for certain grants that demand specific actions.

Some student loans may not depend on previous credit history.
Some student loans may not depend on previous credit history.

A few grants to students like the US Teacher Education Assistance for College and Higher Education (TEACH) require that students teach in certain high need disciplines in schools made up of primarily low income students. If they fail to comply with these steps, their TEACH grants are converted into loans and they end up owing money. While it is generally said that grants are money that won’t require repayment, they might if the grant is contingent on certain actions.

When contrasting government grants and loans, it’s fair to state that most loans will need to be repaid. Terms could be much easier than those received in the private sector, and qualification for certain loans, particularly some student loans, may not depend on previous credit history. This isn’t always true, and people may need to show a decent credit score.

Just as with government grants perhaps requiring repayment, there might be some circumstances where loans do not need to be repaid. A few loans to stimulate new business ownership in minority groups may be ignored if the business fails. Each loan has its own terms and could require that people immediately start making payments or might allow a grace period. Interest and total period for payoff could vary, too.

It’s fairly clear that of government grants and loans, grants are more attractive when they can be obtained. What is available really depends on each country, and there are some good books and online resources that can help people search for different funding sources. It’s wise not to neglect the possibility of private grants or loans, either. Lots of charitable organizations offer grants or loans that are well worth having.

In most cases, unless students are applying for government grants and loans, the application procedure may be more complex. Many people have to fill out long grant applications that require statements about what they intend to do with the money if they receive it. If they’re applying as a business or researcher this can get even more complex. It’s suggested when people are searching for grants, especially, they pick up a good book on grantwriting that has suggestions on how to create the best application. Such a resource could prove useful in obtaining needed money.

Tricia Christensen
Tricia Christensen

Tricia has a Literature degree from Sonoma State University and has been a frequent wiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.

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