Definitions for "Soft Loan"
Loan provided to a project sponsor with flexible repayment terms. Soft loans are generally subordinate to other debt, can have variable repayment schedules and extended terms, and subsidized interest rates.
A loan bearing either no rate or interest, or an interest rate whch is below the true cost of the capital lent.
Can carry an interest rate below the real cost of borrowing or no interest rate at all. The International Development Association – the World Bank affiliate – provides soft loans to developing countries for long term capital projects.