By definition, a loan is when a lender gives money, commodities, or property to a borrower, expecting that the loan would be repaid with interest later. The wealth can be used for various purposes. The general working class of the country usually borrows money when required from financial corporations. There exist different categories of debt under which there are different types of loans. To avail of a loan, you might sometime need some active assets as the same value of money you need to borrow.
Now let us analyze the many types of loans that are in the market now and how they differ from one another in ways that benefit clients.
Personal loans are the most popular type of loan that most banks provide. The money borrowed can be used for any purpose. No collateral or security is deposited with the lender for financing a personal loan. Therefore, it is an unsecured loan. However, the bank will ensure you have assets and a steady income to repay the amount. The interest rates are on the higher side. The tenure might not be very long. Therefore you will need proper financial planning to repay any big personal loan.
Home loans are sanctioned when you need money to acquire a property. Other than a personal loan, it is the most popular type of loan. The benefits include longer tenure, low-interest rates, tax deductions, and many more. There are other types of loans falling under this category such as home-renovation loans, home-extension loans, land-purchasing loans, etc. Generally, a credit score above 750 can help you achieve lower interest rates. It gives you financial assistance and enables you to purchase a home for your family and yourself.
In exchange for a loan amount equal to the market value of gold per gram on the day the gold is pledged. A gold loan is a secured loan in which gold is used as security or collateral. Since collateral is offered, loans are available at low-interest rates. A gold loan can be utilized to raise money to cover urgent or anticipated financial needs. Instead, of taking a personal loan it is advisable to opt for a gold loan if you have enough collateral. However, the attached sentiments of people with gold jewelry sometimes obstruct them.
Education loan is a great help for students who cannot afford college fees. Any bank in India offers educational loans to students who want to pursue higher education. They must pay back the money from their salary if they get a job. The student is the borrower, while any other immediate family member—such as a parent, grandparent, spouse, or sibling—is the co-applicant. Interest rates are low and the money can be used only for educational purposes.
Credit card loan
A credit card has a set, pre-approved credit limit that the owner can use once every month. Taking out a loan against your credit card is similar to taking out a personal loan. Most institutions provide you the option of loans against a credit card if you need money immediately. You may obtain a loan using the credit limit that has been granted to you. Most credit card loans are pre-approved, so you don’t need to provide additional proof, and the loan will be processed and issued swiftly.
One can get a loan to buy two- and four-wheeled vehicles for personal usage. On behalf of the borrower, the lender makes a direct payment to the dealer. Vehicle loans are secured loans, meaning that until the full amount of the loan is repaid, the vehicle you acquired acts as collateral with the lender. The payback time for two-wheeler loans and commercial vehicle financing is five years, while the repayment period for a new car loan is seven years. You may buy and register your car immediately because lenders frequently promptly give the money to the car dealer.
Agriculture loans are loans given to farmers to cover the costs of their ongoing or generic agricultural needs. These loans have extremely low-interest rates and assist farmers in purchasing seeds, farming tools, tractors, pesticides, etc. to increase productivity.
Small and medium-sized firms can get loans for different business needs through business loans. These loans can be used for several things that support business expansion. Compared to share capital, a loan is also a preferable source of funding for a successful organization since it allows for more leverage. To see if you qualify for a business loan from a lender, you must first determine eligibility criteria. The interest rates are generally higher.
Apart from these loans, there are other loans such as loans against FD, loans against shares, loans against insurance policies, overdrafts, consumer durable loans, etc. You can apply for a loan against a fixed deposit you have with a bank. You may apply for an 80,000 INR loan if your fixed deposit is at least INR 100,000. When granting a loan against shares, banks often lend less money than the investment’s entire share or mutual fund value. Consumer durable loans are available to finance the purchase of consumer durables like electronic devices and home appliances. Additionally, you could use the insurance investment as security. There are a whole lot of other options to choose from as well.
In India, a wide variety of loans are offered. Personal loans now cover all financial needs of individuals. Despite having a range of assets they may mortgage to obtain loans at a cheaper interest rate, most consumers choose personal loans over other kinds of loans. Piramal Finance keeps providing guides to help you choose the best for you. Tune in to the website for more personal finance articles.