What defines the difference between a loan and a grant?

What defines the difference between a loan and a grant?

• A. Loans are always government-funded.
• B. Grants must be repaid over time.
• C. Loans typically require interest repayment.
• D. Grants are issued for property purchases only.

Answer: (C)

The correct answer highlights that loans typically require interest repayment, which is a fundamental characteristic that differentiates loans from grants. When an individual or organization takes out a loan, they receive a sum of money with the obligation to pay it back over time, often with additional charges in the form of interest. This means the total amount repaid exceeds the initial amount borrowed. In contrast, grants are financial aids provided without the expectation of repayment, making them more favorable in many situations, particularly for individuals or organizations that may need funding for projects or initiatives without taking on debt. Therefore, the inclusion of interest in loan agreements establishes a key distinction between these two forms of financial assistance.

The correct answer highlights that loans typically require interest repayment, which is a fundamental characteristic that differentiates loans from grants. When an individual or organization takes out a loan, they receive a sum of money with the obligation to pay it back over time, often with additional charges in the form of interest. This means the total amount repaid exceeds the initial amount borrowed.

In contrast, grants are financial aids provided without the expectation of repayment, making them more favorable in many situations, particularly for individuals or organizations that may need funding for projects or initiatives without taking on debt. Therefore, the inclusion of interest in loan agreements establishes a key distinction between these two forms of financial assistance.