In India, there are many different types of loans that can be obtained with a promise to repay the loan within a certain time frame and at a fixed interest rate. The rate of interest is set by the lender, and the borrower is responsible for repaying both the loan and the principle amount borrowed.
In today’s world, as our requirements grow, so do our expenses. So, if we run out of money, we may take out a loan and use it for a variety of purposes. It can be used to purchase a home, study, or purchase a vehicle. That is, the loan can be used to fulfill your requirements.
In this article, we’ll explore at the many types of loans available in India, as well as the characteristics that make them valuable to customers.
Table of Contents
What are productive and unproductive loans?
A loan is considered productive if it is used to support activities that create revenue for the government, such as irrigation and electricity projects. When a loan is used for war or other emergency relief initiatives, it is called unproductive.
Types of Loans in India
Different types of loans are available in India, and they are divided into two categories based on their intended use.
- Secured loans (Home Loan, Loan Against Property, Loan Against Insurance, Gold Loan, Loan Against Mutual Funds, Shares and Fixed Deposit)
- Unsecured loans (Personal loan, Business loans for short-term etc.)
Banks give personal loans to their customers if one needs to do personal work like paying bills, buying a new TV etc. The lender or bank will want certain documents, such as evidence of income, proof of assets, and so on, before granting a personal loan. They examine the borrower’s assets and income to see if he or she has enough to repay the loan. Following that, the borrower must complete out a 2-3 page application. If the lender or bank approves all of these conditions, the borrower will be notified within a few days whether the loan will be approved or not.
The lender or bank will authorize the loan if the asset information or income information, as well as the papers you supply, are in compliance with the lender’s or bank’s terms and conditions.
Personal loans are unsecured loans. Most importantly, a personal loan’s interest rate might be quite high. And it may only be in place for a short time. If you borrow a big sum, keep all of these considerations in mind to determine whether you will be able to return the debt in a timely manner.
Which type of loan is best in terms of low interest rate? When comparing the interest rates of secured and unsecured personal loans, secured personal loans are generally less expensive than unsecured personal loans. You may now quickly determine which form of loan is best for you.
Click here to know about insurances
Almost everyone dreams of having a car. It gives a pleasant vibe. It provides you a lot of convenience in transportation. Moreover, buying a car is an investment in itself and it is as safe as your home.
Credit score is a term that refers to the importance of having a good credit score while applying for a loan. If you want to take a car loan then your credit score should be good. With a good credit score, your loan application will be accepted quickly, and you only need to pay a small interest amount.
A home is a valuable asset that should be owned by everyone. It doesn’t matter if it’s a small or large residence. You can take out a loan, commonly known as a home loan, if you don’t have enough money to build a house.
Home loans are loans used to build or purchase a home. Home loans have a long tenure period, ranging from 20 to 30 years. Before you apply for a house loan, your credit score is checked. If you have a strong credit score, you will most likely be able to obtain a loan with a reduced interest rate.
Purchase of land, building of a home, balance transfer of a home loan, and top-up loans are all available.
It’s important to note that if you’re buying a new house or property, the lender will need a down payment of at least 10% -20% of the property’s value. The remaining is financed.. The amount you get is determined by a number of variables, including your present income, stability, and obligations.
The types of home loans offered in India are as follows:
- Purchase of lands : If you want to purchase you home.
- Construction of a home : If you want to build a home.
- Balance transfer of a home loan : Transfer the remaining balance of your current loan to a lower-interest loan.
- Top-up loans are all available : It may be used to renovate an existing home or to create the most up-to-date interior design for a new home.
If you need money to expand your business, get an education, or deal with a medical emergency and have enough gold, you may get a loan and keep the gold as security.
Gold loans are typically used in times of need. Other than gold, no other metal, gem, or stone jewellery is eligible for the gold loan category.
When you don’t have enough money to pay for college or school, you might take for an education loan. If you wish to study in India or abroad, this educational loan will cover undergraduate, postgraduate, and vocational courses.
Course fees, test fees, and lodging fees are all covered by the educational loan. Close relatives such as a student’s parents, grandparents, spouse, or siblings should be co-applicants if he or she takes out a loan.
Frequently Asked Questions – Loans
Income, Credit score, History of debt repayment
It is required that you have filed an ITR in the previous year.
Personal loans cannot be taken without proof of income.
Full form of EMI is Equated Monthly Instalment.