Loan Advice

Grant vs Loan: What’s the Difference?

Date Modified: May 12, 2022
Jim Hughes, editor at
Sophia Rodriguez, reviewer at

When you need financial assistance, many options can help you, such as getting a grant or a loan. However, before you decide which solution is best for you, familiarize yourself with each product to make an informed decision.

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What Are Grants?

Grants are funds awarded to individuals or institutions for specific use. Grants typically require certain criteria to be met to be eligible for the award. Find a list of grants in the Catalog of Federal Domestic Assistance (CFDA). Also, learn more about the federal grant process and available grants on

Is a Grant Repayable?

Grants do not require repayment. However, keep in mind that grants may have restrictions and requirements that can make them highly competitive. For example, certain requirements must be met to receive a grant, and the money may only be applied towards a particular use.

What Are Loans?

Loans are government funds that can be applied to a variety of expenses. Loans are relatively flexible regarding the qualifications and guidelines on what the money can be used towards. However, unlike grants, loans require repayment with interest.

What Are Examples of Government Loans?

The federal government gives different types of loans. Common types of loans include:

  • Student loans
  • Housing loans
  • Small business loans

Key Differences Between Loans and Grants

Couple comparing loans and grants.

Although grants and loans are both meant to provide individuals with financing, there are key differences between the two options. This is important to keep in mind to ensure you understand repayments, interest, and the purpose of the money. Here is a breakdown of the differences:

  Grant Loan
Repayment  Not required Must be repaid by the lender's specified date 
Interest No interest Interest will be set by the lender, depending on your income and credit score
Purpose Has a specified purpose that will be determined by the individual or institution offering the grant Can be used for almost any expense 
Refund  Funds may be forfeited if it is not used for the intended purpose No refund 
Eligibility  The individual must meet strict eligibility criteria set by the individual or institution offering the grant.  Minimal basic credit, affordability, and income criteria for eligibility 
Availability  A limited number is available. It is often very competitive  Many loans are available 


Despite the differences, grants and loans also share some similarities. Both grants and loans are meant to be long-term financing options. Additionally, the process of applying for a loan and grant is similar, requiring an application, minimum criteria, and an approval or denial process. Finally, for both grants and loans, the funds may be provided by a bank, institution, or government. Most often, the funds can be used to cover university, housing, or business costs. 

The Difference Between Small Business Grants and Loans 

A small business loan is financing offered by a bank or financial institution to a startup or newly founded business. Small business loans are like regular loans with interest and repayment terms between five and 10 years. However, the funds are typically used for business-related costs, such as paying salaries, buying equipment, purchasing inventory, paying rent, or marketing costs.

A small business grant is funding offered by the government or a private institution. Unlike a small business loan, the grant has stricter eligibility requirements and the funds must be used for a specific purpose. For instance, a small business may only qualify for a grant if it is in the healthcare sector and the funds are being used to treat underprivileged individuals. If the small business fails to use the money for this specified purpose, then they may be required to relinquish the funds and lose the grant. However, a small business grant does not need to be repaid. 

Where to Search for Personal Grants

Private foundations and the federal government often distribute grants. But there are so many unclaimed funds because people don’t know that they exist. Here are seven ways to find personal grants.

Federal Grants Program

The government has several grant programs, and each provides solutions to different problems. To find a government grant, visit and and filter your search result for individuals under the Eligibility section. Then go to the list of individual grants and see which grants you may qualify for.

Nonprofit Organizations

Many nonprofit organizations and local associations are always ready to assist people who are going through hard times. Local organizations are very resourceful and have an active role in their communities. They typically inform the community about available grants in advance and help them go through the application process.

Private Foundations

Professional group meeting. Foundations are nonprofit corporations usually owned by a wealthy philanthropic family who wants to:

  • pursue charitable purposes,
  • give back to the community,
  • help a specific cause,
  • and aid people in need.

Look for organizations with grants available locally and reach out to the staff members to get all the necessary information for the application. Most foundations follow up with their grant applicants to learn more about their progress and challenges.

Your Congressperson

You can reach out to your congressman’s office and ask for available grants. They will do whatever is in their power to help you find new programs or programs that match your needs. You can also visit to search for available grants.

Local Organizations

Local organizations are a great help in finding personal grants. They have an extensive resource of available grants, whether it is state level or through other charities. First, search for local organizations that provide shelter and help low-income or middle-class families. Then contact them to get information about free personal grants that are available.

Philanthropic Businesses

You may find local businesses that have taken the initiative to give back to the community and families who need financial assistance. Take a look around your neighborhood, search for philanthropic companies that have a hand in giving back, and reach out to the staff or the business owner to see if personal grants are available.


Your local municipality may know about available personal grants that organizations and associations are not aware of yet. So, reach out to your city and ask them to share information about local grants they know of.

Common Usage of Personal Grants

Mechanic repairing car.Personal grants are not as restrictive as other forms of assistance or financial aid, such as a small business grant or college grant. You are not required to use them for a specific purpose. Depending on your needs, it allows you to use the funding for whatever financial troubles you face to alleviate stress and improve circumstances. When receiving a grant, people typically use the budget to finance the following:

  • Medical bills
  • Rent
  • Utilities
  • Mortgage
  • Insurance
  • Transportation
  • Fuel
  • Car repairs
  • Home repairs
  • School supplies

What Are Some Other Types of Grants?

In the United States, there are more than 900 grant programs provided by 26 federal grant-making agencies. The programs fall into 20 categories:

Categories Examples of Grants


Rural Development Loan and Grant Assistance


Grants for Arts

Business and Commerce

PPP Loan, EIDL Loan, EIDL Advance (EIDL Grant)

Community Development

Community Development Block Grant Programs

Consumer Protection

The Health Insurance Enforcement and Consumer Protections Grant Program

Disaster Prevention and Relief

Emergency Food and Shelter Program

Education Regional Development

Pell Grant (state grant)

Employment, Labor, and Training

Strengthening Community Colleges Training Grants Program


State Energy Program

Environmental Quality

Food Pantry Assistance Grant Program


Children's Health Insurance Program


Homeownership Program


National Endowment Grant

Law, Justice, and Legal Services

Presidential Residence Protection Security Grant

Natural Resources

Water Infrastructure Improvements for the Nation Act Grants

Science and Technology

National Science Foundation

Social Services and Income Security

Child Care Disaster Relief


Rural Opportunities to Use Transportation for Economic Success

Commonly Used Grants

If you're wondering whether you may qualify for grants, here are some of the most common options:

Home Repair Grants

Plumber fixing sink.The Section 504 Home Repair Program is a grant that offers funding to low-income homeowners. The grant can be utilized for home repairs and improvements. Additionally, this grant can also be issued to elderly low-income homeowners.

Does This Program Also Provide Loans?

Yes, the Home Repair program offers both grants and loans.

What Are the Requirements to Qualify for a Home Repairs Grant?

To qualify for the home repairs grant, you must be:

  • The homeowner and occupant of the house
  • Unable to secure affordable credit from another institution
  • Falling below 50% of the area median income
  • Above age 62 and unable to repay a repair loan (specific to elderly applicants)

How Much Can You Receive from Both Loans and Grants?

  • Maximum loan: $20,000
  • Maximum grant: $7,500
  • You can also combine both the loan and grant to receive $27,500

What Are the Conditions for the Home Repair Program?

For loans:

  • Can be repaid over 20 years
  • Interest rate is fixed at 1%
  • You must have full title service to be qualified for loans of $7,500 or more

For grants:

  • No need for repayment unless the property is sold in less than three years

How Are the Funds Used for Home Repairs?

  • Loans may be used to repair, upgrade, or develop homes. Also, they can be used to eliminate health and safety risks.
  • Grants must be solely used to eliminate health and safety risks.

Low-Income Home Energy Assistance Program (LIHEAP)

Young adult sitting near fireplace.The Low-Income Home Energy Assistance Program (LIHEAP) is a grant that supports qualified low-income households with their heating and cooling energy expenses. They also assist with bill payments, energy crisis assistance, weatherization, and other energy-related home improvements.

How to Apply for the Low-Income Home Energy Assistance Program (LIHEAP)?

Before applying, you must find out if you are eligible for the program. Contact your state or tribal LIHEAP office.

Emergency Rental Assistance (ERA)

The emergency rental assistance program provides funds to help households that cannot pay rent or utilities.

Who Can Receive Assistance from the ERA?

To qualify for ERA:

  1. One or more individuals in the household must be unemployed or receiving benefits.
  2. One or more individuals in the household suffered decreased income, increased costs, or other financial difficulties.
  3. One or more individuals in the household are on the verge of homelessness or vulnerability.
  4. The household income is at or below 80% of the area’s median income.

Where Can I Find More Information on Emergency Rental Assistance (ERA)?

Read more about emergency rental assistance (ERA) on

Temporary Assistance for Needy Families (TANF)

The Temporary Assistance for Needy Families (TANF) program provides states the necessary funding to help families in financial hardship. TANF primarily issues monthly cash support subsidies to families with children. Additionally, the program offers child care assistance, job preparation, and work assistance. The program is geared towards helping low-income families achieve economic self-sufficiency.

The Federal government allocates funds to states to run the TANF program.

Who Is Eligible for The TANF Program?

To assess your eligibility, you can visit for more information.

The Supplemental Nutrition Assistance Program (SNAP)

Smiling family unpacking groceries.The Supplemental Nutrition Assistance Program (SNAP) is the biggest federal nutrition assistance program. SNAP grants benefits to qualified low-income individuals and families to purchase food. Through a convenient Electronic Benefits Transfer card, eligible individuals can purchase food in authorized retail food stores.

Who Is Eligible for This Program?

Check out to confirm eligibility.

Where To Apply?

Application requests can be filed here. You can also find much more useful information about SNAP or other grants through the website.

Sum Up

Many people have improved the quality of their lives through grants and loans. There are many private foundations, charitable organizations, and other philanthropic agencies that award monetary gifts. Remember that qualifying for a grant may be challenging because of the number of applicants and requirements. To decide which option is best for you, evaluate your finances and long-term goals. Consider getting a cash advance if you need a short-term loan to address an emergency expense. Otherwise, consider applying for a grant as it does not require repayment and can be used for various needs.

Ana-Maria Sanders, author at OpenLoans
Lead Writer
Ana-Maria Sanders is a highly-regarded writer with over a decade of expertise in the personal finance sphere, specializing in loans and credit cards.
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