In India, banks and private financial companies offer various types of loans. Common loans include personal loans, educational loans, gold loans, business loans, and vehicle loans.
Loans serve as an ideal solution for individuals looking to meet their financial needs and requirements. They can be from a short time to a long time, depending on the types of loans. To get any type of loan from banks or a private financial company, having a good credit history is necessary in India. If you want to learn about the types of loans in India and their related details, stay connected with this article!
Types of Loans in India
In India, common loans include personal loans, educational loans, vehicle loans, and gold loans. Here’s an explanation of the types of loans.
Secured Loans
Secured loans require borrowers to provide collateral as security. It means you will need to offer collateral or security to take a loan. It includes home loans, loans against property, loans against insurance policies, gold loans, vehicle loans, etc.
Home Loan
A home loan is the most common type of secured loan provided by banks or financial companies. It enables you to purchase a home. It includes land purchase loans, home construction loans, top-up loans, and home loan balance transfer loans. There are many government and private banks and financial companies that provide home loans at different interest rates and tenures.
Loan Against Property (LAP)
Loan Against Property (LAP) is another type of secured loan. To avail of the funds, you will need to pledge any residential, commercial, or industrial property. Different banks and private financial companies offer loans against property (LAP).
Loan Against Insurance Policies
It is another type of secured loan provided by banks or financial companies. You will need to submit your insurance policies, such as endowment and money-back policies, to avail of the funds.
Gold Loan
A gold loan is a popular type of secured loan in India. Borrowers can avail themselves of the funds by pledging gold jewellery or coins as collateral. These loans are usually used for short-term needs and have a short-repayment tenure compared to other loans like home loans and LAPs.
Loan Against Mutual Funds and Shares
Loan against mutual funds and shares is another type of secured loan in India. It requires mutual funds and shares as collateral to avail of the funds. Many private financial institutions offer loans against mutual funds and shares.
Loan Against Fixed Deposits
Loan against fixed deposits offers assured returns. To avail of the funds, you need to submit your fixed deposits. It is similar to other loans, like loans against mutual funds & shares, and loans against insurance policies.
Vehicle Loan
Vehicle loan is the most popular loan in India. It usually meets the vehicle requirements for any person. These loans are designed for purchasing cars, commercial vehicles, and bikes. It is a secured loan that is a good source for those who want to purchase cars with loans. As a collectible, the vehicle itself serves, making it a secured loan.
Loan Against Securities
Loan against securities enables borrowers to pledge investments such as shares, mutual funds, or fixed deposits as collateral. You need to pledge investments such as shares, mutual funds, or fixed deposits to avail of the funds.
Unsecured Loans
Unsecured loans are the second type of loans. These loans do not require borrowers to provide collateral as security. It means you don’t need to pledge any type of collateral to avail of the funds. Instead of pledging any type of collateral, you will need to have a good credit history to avail of the funds of unsecured loans. Here are the most common types of unsecured loans.
Personal Loan
A personal loan is one of the most popular types of unsecured loans offered by banks and financial companies. It offers instant liquidity, making it a great choice for those who want to borrow quickly without collateral. However, the interest rates are higher than those of secured loans. It can be taken to cover some types of expenses, such as family expenses, home renovation, or urgent expenses. To avail of the funds, you will need to have a good credit score, usually between 700 and 900.
Short-Term Business Loan
A short-term business loan is another type of unsecured loan. It is taken to cover many expenses, including buying machinery. It includes working capital loans, small business loans for MSMEs, machinery loans, equipment finance, loans for traders, etc. Many government & private banks and private financial institutions offer these loans at different interest rates and tenures.
Education Loan
An education loan is another type of unsecured loan. To avail of the funds of an education loan, you don’t have to pledge any type of investment as collateral. These loans are great for higher studies because they cover tuition fees, accommodation, and other applicable expenses. These loans are offered to students with flexible repayment options, making them ideal for many students in India.
Credit Cards
Credit cards are the most trending and popular options for instant funds. Various banks offer different credit cards with their available credit limits. Credit cards hold limits based on the users and their credit scores. Cards offer a revolving line of credit for all types of expenses, from daily purchases to emergencies. These loans are fully unsecured but require a good credit history of borrowers.
These are the types of loans available in India. Many government & private banks and financial institutions offer a vast range of loans, including personal loans, education loans, gold loans, vehicle loans, loans against property, home loans, etc. They have different interest rates and tenures. Unsecured loans have higher interest rates than secured loans. For more details about the types of loans in India, try an online search.
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