Soft Loan
Categories: Credit
A soft loan is a sweetheart deal for the borrower. The terms are very generous: below-market interest rate, lenient repayment terms, long maturities with manageable payments....that sort of thing.
However, these aren't necessarily the type of deals rich folk might get from their squash partner who works down at the bank. Instead, soft loans usually come up in international relations.
The most common use of the term has to do with loans to developing nations. The country of Loopistan needs money to build an oil pipeline from its newly-discovered oil fields to a port city, so it can get the oil onto the international market. So the World Bank and a few major countries arrange a soft loan. Loopistan gets the money it needs for the pipeline, at cheap interest rates and reasonable terms. Meanwhile, the world gets a new supply of oil.
