A soft loan is a loan provided at a below-market rate to borrowers who cannot obtain one at the market rate.

Soft financing is usually provided for developing nations and can be obtained from an international or world bank. Longer payment schedules and the option to make interest-only payments allow developing nations to make lower repayments.

Soft financing can also be provided to individuals through government financing programs for low-income, first-time home buyers. The soft loan is usually a second mortgage that allows the buyer to purchase a home she would not have been able to afford without the soft second loan. The repayment plan for the soft second loan can include a longer payment schedule, interest-only payments or lower down payment requirements.

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