Loan

Loans are vital financial tools for individuals, businesses, and organisations to meet various needs. These needs include purchasing a home, funding education, purchasing a vehicle, or expanding a business.

Type of Loans in India

1. Home Loans

Home loans help individuals purchase or construct residential properties. These loans typically have longer repayment tenures, ranging from 10 to 30 years. The interest rates on these loans can be fixed or floating, and borrowers often have the option of receiving government subsidies for affordable housing.

2. Personal Loans

A personal loan is an unsecured loan furnished by banks and financial institutions without collateral. They can be used for personal expenses like medical emergencies, weddings, travel, or debt consolidation. Due to the absence of collateral, the interest rates on personal loans are usually higher than those on secured loans.

3. Car Loans

Car loans are specifically tailored for purchasing vehicles, including cars, motorcycles, and commercial vehicles. The loan amount can cover a substantial portion of the vehicle’s cost, and the vehicle itself acts as collateral for the loan. Repayment periods typically range from 3 to 7 years.

4. Education Loans

Also known as student loans, education loans are designed to fund expenses associated with higher education, such as tuition fees, books, and accommodation. These loans have favourable terms, including lower interest rates and longer repayment periods. Education loans are available for studying both domestically and abroad.

5. Business Loans

Business loans are provided to entrepreneurs and businesses to fund operational needs, including working capital, expansion, equipment purchase, or project financing. These can be either secured loans or unsecured loans, depending on the borrower’s creditworthiness and the lender’s policies.

6. Loan Against Property (LAP)

This is a secured loan where a borrower will pledge their residential or commercial property as collateral to receive funds from banks or financial institutions. The loan amount sanctioned is usually a percentage of the property’s market value. LAP can be used for business expansion, debt consolidation, or other personal or business-related expenses.

7. Gold Loans

This is a type of secured loan in which borrowers pledge gold jewellery or ornaments as collateral to borrow funds from banks or non-banking financial companies (NBFCs). These loans are popular due to their quick disbursal process and relatively lower interest rates than other unsecured loans.

8. Loan Against Securities (LAS)

Loan against securities allows borrowers to pledge their financial assets—stocks, mutual funds, or bonds—as collateral to secure a loan. The loan amount sanctioned depends on the value of the securities pledged. LAS offers quick access to funds without liquidating the underlying assets.

9. SME Loans

Small and Medium Enterprise (SME) loans are devised to meet the financial requirements of small and medium-scale enterprises for business expansion, working capital, machinery purchase, or infrastructure development. These loans cater to the needs of SMEs and are offered by banks, NBFCs, and government schemes.

10. Microfinance Loans

Microfinance loans provide financial assistance to low-income individuals and small businesses, typically in rural areas. These loans empower borrowers to start or expand small businesses, improve livelihoods, and alleviate poverty. Microfinance institutions (MFIs) are India’s primary providers of microfinance loans.