Financial management is essential for leading a stress-free life. While you always save and build a corpus for emergencies, it is not ideal to consume your savings every time there is a cash crunch. For, it can challenge your future life events and retirement planning. Thus rather than using your savings, it is advisable to opt for a bank loan in many situations.
A wide range of loans is available from a host of banks, NBFCs, and financial institutions operating in our country.
You can apply for all types of loans in India—whether you need for health, medical, or building assets online or offline as per your needs. In simple words, you can categorize loans as secured and unsecured loans. Each loan comes with a fixed repayment tenor, during which you must repay an EMI constituting principal as well as an interest component.
The rate of interest varies for various products according to applicants’ credit profile and lenders’ credit policy. Here is a list of different types of loans you can apply in India.
A Personal Loan is an unsecured loan that can be availed of without pledging collateral to the lender. It is essentially an all-purpose loan, and the amount can be used for any of your financial requirements such as home loan down payment, business expansion, higher education, foreign vacation, dream wedding, repayment of the debt, etc. Most of the leading banks and NBFCs offer Personal Loans up to Rs. 40 Lakhs for 60 months.
As the name suggests, a Home Loan is a secured loan offered by financial institutions to their customers for purchasing a residential property only. As a Home Loan is a secured offering, the residential property acquired with the loan amount must be offered as collateral to secure the amount. The money availed as a Home Loan can be used for the purchase and construction of a residential property only. The maximum repayment tenor for a Home Loan in India can go up to 20 years, wherein there is virtually no cap on the maximum amount. Home Loans can be very high ticket loans and can go as high as Rs. 5 crores.
Business Loan is a term used to represent various types of credit products offered by financial institutions to businesses. Some of the most popular Types of Business Loans in India are Machinery Loan, Working Capital Loan, CC limit, Letter of Credit, etc. The money availed as a Business Loan can be used for business-related purposes only.
Business Loans can be secured or unsecured, depending on the purpose and type of loan. Any assets acquired with a Business Loan are hypothecated with the lender. Business loans can be availed as Term Loans, Overdraft or Dropline Overdraft, as per the requirement of the borrower. There is no cap on the maximum amount available as a Business Loan, while repayment tenor can go up to 15 years.
Thus a business loan can be a secured or unsecured loan. The central and state governments also offer a host of subsidised Business Loans for special categories, Start-Ups and financially weaker sections of society.
It is a Secured Loan offered by financial institutions to their customers against the mortgage of a property. To avail of a Loan Against Property, the borrowers need to mortgage a residential or commercial property with the lenders. The money borrowed can be used for any personal or business-related requirement by the borrower.
Many lenders offer the facility of a Top-Up loan against property as well. Usually, the maximum repayment tenor for LAP is 15 years, while there is no limit on the maximum amount available.
A gold loan is a secured loan offered for varied financial requirements of customers. To avail of a Gold Loan, customers must mortgage their gold jewellery or bullion with the lender. Usually, lenders offer up to 75% of the market value of the gold as the loan amount while the repayment tenor can vary from a few months to a few years. There is no fixed repayment schedule for a Gold Loan. The customer can herein, opt to pay interest only as EMI, or can pay the entire amount on maturity of the loan. Money availed as a Gold Loan can be used as per your needs.
Education Loan is an unsecured loan offered by financial institutions to fund higher education cost. The money is transferred directly to the university or college in lieu of the fees payable by the student. Usually, lenders require a co-applicant or guarantor for sanctioning an Education Loan. Borrowers need to serve only the interest during the period of study while the repayment begins after one year of completion of the study or the student getting a job.
Vehicle Loans are secured loans offered by financial institutions to facilitate the purchase of a vehicle for their customers. It could be a car, motorbike, scooter, or any other commercial vehicle like a truck or tempo. The vehicle purchased with the loan amount must be hypothecated with the bank. The loan must be repaid in a maximum tenor of 7 years.
Credit Card Loans are pre-approved loans offered by Credit Card companies/ banks to their customers. This option is suitable for short-term urgent financial requirements only as the rate of interest can be on the higher side. This facility is available for select customers only, who must use their internet banking or contact the customer care department to avail the loan. Credit Card Loans can be used in the form of an EMI facility as well while making online and offline purchases.
These are unsecured loans offered by financial institutions to allow their customers to purchase various consumer products such as smartphones, washing machines, televisions, etc. The maximum repayment tenor available is usually 24 months, while most lenders do not levy any interest charges against this facility. Customers can avail of this facility both online as well as offline.
Customers can use their assets like Fixed Deposits, Insurance Policies, or Equity Shares to avail secured loans for their financial requirements. The asset must be hypothecated with the lender to avail this type of loan. As it is a secured facility, the rate of interest is much lower than unsecured loans like Personal Loans. Borrowers can use this facility for any financial requirement of theirs.
With so many options available, you need not resort to using your savings during financial emergencies. Just select the most suitable type of loan for your requirements and enjoy significant peace of mind while overcoming your financial hassles.
Also Read: 5 Most Common Types of Loans in India
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