 TITLE: What Is a Government Loan? CONTENT: How Do Government Loans Work?\n-----------------------------\nWhen the government lends money to individuals, it usually doesn't do it directly. Instead, it guarantees those loans issued by banks, credit unions and other private lenders. This guarantee protects the lender if the borrower fails to repay the loan.\nIn some cases, however, a government loan does indeed come directly from Uncle Sam. For instance, the U.S. Department of Agriculture (USDA) might lend money directly to a farmer or rancher using money appropriated by Congress as part of the USDA budget. The USDA may issue and service the loan without help from a private lender.\nFurthermore, a government loan may be subsidized or unsubsidized. For example, the federal government pays the interest on a subsidized student loan that's accrued while you're in school, but with an unsubsidized student loan, you're always responsible for paying the interest.\nWhy does the government support loans? The reasons include the potential to offer:\n*   Lower interest rates compared with private loans.\n*   Better odds of being approved versus private loans.\n*   Capital for business owners who might not be able to secure it through private loans.\n*   Flexible repayment and forgiveness plans.\n*   No credit checks. END