[ecis2016.org] Types of loans: Mentioned are different types of loans in India that you can avail of
In India, a variety of loan types are available. Despite having a variety of assets which one can mortgage to obtain loans at lower interest rates, most people opt for personal loans over other types of loans. The lack of knowledge about the different types of loans available in India is one reason behind this situation.
You are reading: Types of loans in India
Loans are defined as a specified sum of money borrowed from a lender (usually a bank) with the promise of returning it within a specific time frame. Different types of loans are charged different rates of interest by lenders. As per the agreement between the two parties, the borrower repays the borrowed amount along with interest in instalments.
Types of loans
Unsecured loan
Loans provided without pledging collateral as security in case of default or non-payment of dues are unsecured loans based solely on the creditworthiness of the borrower. Borrowers with high credit ratings are often provided with unsecured loans, which are also known as personal loans. To finance your requirements, you can choose from a variety of unsecured loans, including:
Personal loan
An unsecured personal loan is a loan provided by a financial institution based on factors such as employment history, repayment capacity, income level, profession, and credit history. Consumer loans, also known as personal loans, are multipurpose loans that can be used for a variety of purposes. A personal loan offers flexible repayment options, short- to moderate-term repayment options and relatively quick funding. You can use personal loans to consolidate high-interest debt, start a business, or pay an expensive medical bill.
Small business loan
Small business loans are different types of financing provided by different lenders to companies for a variety of purposes. Small business loans have evolved to meet the needs of entrepreneurs. In other words, the way a small business loan works depends on the type of loan. You can access capital to invest in your business when you take out a small business loan. Many different uses can be made of the funds, including working capital, improvements like renovations, technology and staffing, business acquisitions, real estate purchases, and much more.
Flexi loan
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Flexi loan help you avail funds from your approved limit and you have to pay interest only on the amount used. You can also pay interest as EMIs.
Education loan
This loan can be taken for a full-time, part-time, vocational course, graduation or post-graduation courses. The student has to pay the loan after completion of the course.
Vehicle loan
With vehicle loan, you can purchase a two-wheeler or four-wheeler easily.
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Secured loan
Borrowers who obtain secured loans must provide some type of collateral as a condition of borrowing. If your credit score isn’t high enough to qualify you for an unsecured loan, a bank or lender may ask for collateral for large loans that will be used to purchase a specific asset. Borrowers may benefit from lower interest rates with secured loans, as they present a lower risk to lenders. Some types of secured types of loans in banks carry higher interest rates, including personal loans for people with bad credit and short-term instalment loans. The following are a few examples of secured loans:
Home loan
To obtain a home loan, a property must be used as collateral. With home loans, you get high-value financing at affordable interest rates and for the long term. EMIs are used to repay them. Once the debtor has repaid the loan, the title of the property is returned to him.
Loan against property
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Loans against property are secured loans that can be useful both for salaried individuals and for businesses. Your property can be mortgaged to secure the loan. Banks approve a loan amount equal to the property’s current value. Compared to other types of India loans, a Loan Against Property is the best option if you own a fully constructed residential or commercial property without any other encumbrances.
Loan against securities
An asset-based loan is one in which you pledge your shares, mutual funds, or life insurance policies as collateral to the bank. An investor can raise funds with a loan against securities by leveraging their existing investments. As long as the pledged securities continue to earn interest, dividends, bonuses, etc., the borrower continues to receive credit from them. Long-term investors will find this loan facility an excellent choice.
Loan against insurance policies
You can take loans against insurance policies, but not all insurance policies qualify for this. Policies with a maturity value such as endowment and money-back policies can avail secured loans. But you can only take advantage of these policies after they have acquired a surrender value.
Gold loan
You can pledge your gold ornaments as collateral for such loans. They are usually short-term loans and have a short repayment period.
Loan against fixed deposits
You can take loans upto 70-90% of the fixed deposit’s value and the loan period is usually the same as the FD tenure.
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