Template is a predefined form of SMS content that can be re used again    Favorite is any template that can be accessed quickly for regular usage. You can add certain templates as favorites too.
Template needs approval    Favorite doesn't need approval
Template cannot be configured on a Promo application    Favorite can be used on Promo application too.
Template should have only transactional content and must be created by default while setting up SMS account    Favorite need not be set up as part of signing up process.