Grants vs. Loans: Key Differences, Eligibility, and How to Apply in 2026

What Is a Grant? Definition and Key Features

A grant is a form of financial assistance provided by a government, organization, or foundation to support a specific purpose, such as education, research, or community development. Unlike loans, grants do not require repayment, making them a highly desirable funding source for students, nonprofits, and researchers. For a deeper dive into what grants are and the different types available, see our comprehensive guide on [what is a grant: definition, types, eligibility, and how to apply](what-is-a-grant-definition-types-eligibility-how-to-apply-2026-guide).

The Cambridge Dictionary defines a grant as ‘an amount of money given especially by the government to a person or organization for a special purpose.’ Grants are typically awarded based on merit, financial need, or alignment with the funder’s objectives. For example, a student might receive a grant for outstanding academic achievement, while a nonprofit could secure funding for a community health project. If you’re interested in learning more about who qualifies for grants and how to apply, check out our article on [grant eligibility criteria and application tips](grant-eligibility-criteria-who-qualifies-how-to-apply-for-grants-in-2026).

What Is a Loan? Definition and Key Features

A loan is money borrowed from a lender—such as a bank, credit union, or government agency—that must be repaid over time, usually with interest. Loans are commonly used to finance education, start a business, or cover personal expenses. Unlike grants, loans require repayment, often with additional costs due to interest.

According to Merriam-Webster, a loan is ‘money lent at interest.’ Loans create a legal obligation to repay the borrowed amount, often with interest. For instance, a student loan helps pay for college but requires regular payments after graduation. For a detailed comparison of grants, loans, and scholarships, see our [key differences and eligibility guide](grants-vs-loans-vs-scholarships-key-differences-eligibility-how-to-apply-2026-guide).

Eligibility Criteria: Grants vs. Loans

Eligibility for grants often depends on factors such as financial need, project goals, academic performance, or organizational mission. Applicants usually submit detailed proposals, budgets, and supporting documents. For example, a research grant may require a project outline and evidence of impact. To learn more about who qualifies for grants and how to apply, visit our [in-depth eligibility guide](grant-eligibility-criteria-who-qualifies-how-to-apply-for-grants-in-2026).

In contrast, loans are generally accessible to a broader range of applicants. Approval is based on creditworthiness, income, and repayment ability. Some loans, like federal student loans, have specific requirements, while private loans may need a co-signer or collateral. This means even those who do not qualify for grants may still access loans.

Repayment Obligations: Grants vs. Loans

The most significant difference between grants and loans is repayment. Grants do not need to be repaid, provided the recipient follows the terms and uses the funds appropriately. This makes grants especially attractive for students and nonprofits seeking non-repayable funding.

Loans, on the other hand, must be repaid according to an agreed schedule, including interest. Missing payments can result in penalties, damaged credit, or even legal action. For example, defaulting on a student loan can impact your ability to borrow in the future. For more on how to choose between grants, loans, and scholarships, see our [comprehensive comparison guide](grants-vs-loans-vs-scholarships-key-differences-eligibility-how-to-apply-2026-guide).

Types of Grants: Government, Private, Educational, and More

Grants come in various forms, including government grants, private foundation grants, educational grants, research grants, and nonprofit grants. Each type has unique eligibility criteria and application processes. For a breakdown of the main types of grants and how to find the right one, see our [guide to types, eligibility, and how to apply](what-is-a-grant-types-eligibility-and-how-to-apply-2026-guide).

Government grants often support public initiatives or scientific research. Educational grants, such as the Pell Grant in the U.S., help students pay for college. Private grants may focus on specific causes, like environmental conservation or the arts. Understanding the different types can help you target the right grant opportunities.

Types of Loans: Federal, Private, Subsidized, and Unsubsidized

Loans can be categorized as federal, private, subsidized, or unsubsidized. Federal loans, such as Stafford or Perkins loans, often offer lower interest rates and flexible repayment options, making them popular among students seeking financial aid.

Private loans, offered by banks or credit unions, may have higher interest rates and stricter approval criteria. Subsidized loans have interest paid by the government while the borrower is in school, whereas unsubsidized loans accrue interest from the moment funds are disbursed. Choosing the right loan depends on your financial situation and long-term goals.