A loan is money borrowed which has to be repaid after a certain time period. The lender sets a fixed rate of interest that you have to repay at the principal amount. So let us see what loans and types of loans are given in India.
Types of loans
There are many types of loans available in India. They are mainly distributed keeping two factors in mind. The first is secured loan and the second is unsecured.
Types of Secured Loans
Home loan is a security method of finance that provides you money to buy or build a house. Many types of home loans are also available in India viz.
Land Purchase Loan: This loan is taken to purchase land.
Home Construction Loan: Home construction loan is taken for construction of house.
Home loan balance transfer: This loan is given at a low interest rate.
Top up loan: This loan is given for selling an old house or property or for building a new house.
Loans against property
This type of loan is the highest in India. In this type of loan, you pledge your property or land for a loan. When you repay the loan money, you get the property papers back.
Loan against insurance policies
You can also take a loan by pledging your insurance policy paper. It is also important to note that not all insurance policies qualify for loans. There are only a few insurance policies through which a loan can be taken through.
Apart from property and insurance policy, you can also take a loan by pledging gold. This method is very popular in India. You can take a loan by keeping your jewelery or pure gold with the bank or lending company. This loan is given for short term only. If you are unable to repay your loan on time, then you lose the right to that gold.
Loan against fixed deposits
The percentage of fixed deposits can be 70 to 90.
Loan against mutual fund and shares
Just as you take a loan by pledging your insurance policies, you can also take a loan through mutual funds and shares. Taking loans through mutual funds and shares is not yet a popular method in India as very few people have interest in mutual funds and shares.
Types of Unsecured loans
Personal loan is a very popular method of unsecured loan. The rate of interest in a personal loan is much higher than a secured loan. So you have to keep in mind that your repayment amount is also going to be very high. Personal loan is used for some main tasks viz.
- Loan for marriage
- Taking a loan to fix a house
- Taking a loan to go on an international trip
- Taking a loan in any emergency
- Taking loan for children’s education
Short term business loans
Most organizations or companies take short term business loans from it. 100 tonne business loan is also a method of unsecured loan and it is very popular in the business industry.
This loan is taken for :
- Loan for traders
- Loan for manufacture
- Loans for service enterprises
- Loans for Women Entrepreneurs
- Loans for MSMEs
- Loan for machinery
- Working capital loan
Even if we know the purpose of taking a loan, then the loan can be divided into several types, eg.
If a student takes admission in the institute for higher education, then his fees are very high. Apart from this, you need a loan while going for higher education in another country. At this time, students only have the option to take an education loan. The main borrowers at this time are student siblings and spouses.
Vehicle launches help you in terms of buying a two or four wheel instrument. If your dream is to buy an instrument but you are not able to do it, then vehicle loans provide you this facility. In this type of loan, your credit score, ratio of debt and loan tenure are also efficient.