Get The Latest Updates

SUBSCRIBE

Different Types of Loans Available in India

  • 2 min read

  • 800Views

  • 50People Reading right now

  • SHARE

  • Highlights

  • Different Types of Loans Available in India

  • What is a Loan?

  • Secured Loans

  • Unsecured Loans

Taking different types of loans in India has always been a popular way to solve financial issues. From addressing medical, social and even personal expenses, loans have become essential rescue agents for us in times of need. In this article, you’ll learn about the different types of bank loans in India and everything you need to know about them.

What is a Loan?

A loan is an amount borrowed from a financial organization to be returned at an agreed period. Undoubtedly, the importance of loans cannot be overemphasized. But it’s even more important to know that there are different types of loans for diverse needs.

Therefore, getting acquainted with all the different types of loans in India is the first step to arriving at a favourable end if you ever need to take a home loan. The different types of loans in India are classified based on two factors: 

  • The need for collateral
  • The purpose of the loan

Concerning the need for collateral, loans are classified into secured loans and unsecured loans. 

1. Secured Loans

These types of loans function with the need for collateral. Borrowers, on getting their loans, are expected to offer their assets as collateral to the financial organization they are borrowing from. These assets stand as security for the lender if the borrower never repays the loan. 

There are so many types of loans that can be categorized as secured loans, and some of them are: 

a. Loan against property

Loan against property is quite popular among many people or at least people who are familiar with loans. However, when it comes to loans against property, the borrower is expected to pledge any of their properties before taking the loan.

b. Home loan

If you have ever had a dream to own a home, here is a type of loan that focuses on helping you build the home of your dreams by availing of funds as much as you would want. In India, the varyinghome loan types include:

  • Land purchase loan, which involves buying land to build that home. 
  • Loan for repairing an already built home.
  • Loan for constructing a house. 

c. Gold loan

It is a type of loan in India that allows the borrower to pledge gold jewellery in exchange for the funds they seek to have at the time. Gold loans are not that scarce in India even though they are the type of loans people use to meet short-term needs, unlike the loan against property which is more useful for long-term needs. 

d. Loan against mutual funds and shares

In India, there is also a provision to use one’s mutual fund investments as a loan collateral. In availing of a loan against mutual funds, you pledge the hybrid funds or equity to the financial organization you will be borrowing from. 

e. Loans against fixed deposit

Your fixed deposit can also come in handy when trying to take a loan from any financial organization. The loan can be 70 – 90 % of the fixed deposit value, and the loan tenor will last as long as the fixed deposit tenor lasts. 

2. Unsecured Loans

These types of loans do not need collateral. Instead of being eligible to borrow based on the value of your property, you take a loan because of your financial history. So, if you ever want this type of loan, you must ensure that your financial history is untarnished. There types of unsecured loans include:

a. Personal loan

Just as the word ‘personal” implies, a personal loan is collected to cater for your individual needs. And these needs often range from debts to getting yourself something you want to taking care of bills. Because of its peculiarity, a personal loan is one of the most popular types of unsecured loans. Given its unsecured nature, the interest rate for a personal loan is higher in comparison with any secured loan.

b. Short-term business loans

This type of loan in India is also quite common. And it is often in different forms as long as it sits under the umbrella of a small business. It could vary from loans for traders, manufacturers, service enterprises, working capital loans, and machinery loans, among others. 

As to how many more types of loans we have in India, we can also delve into another category, which is the purpose of the loan. The different types of loans in this category include the following:

c. Education loans

To make the high costs of education achievable for every student, education loans are made by every prominent lender. In India, taking a student loan is the norm. Therefore, education loans help to cater for necessities like school and examination fees. Also, it covers the accommodation fee when necessary.  

As far as education loan in India is concerned, the student is the primary borrower while the parents or guardians serve as the co-applicants. 

d. Vehicle loans

Your dream to own a car or bike is shared by many. However, if you do not have the money to buy it, it may never become a reality. This is where a vehicle loan comes in: to give you the purchasing power to make your dream come true.  

e. Agricultural loans

To seek additional funding to aide in agricultural activities is seen recognised in India and agricultural loans have been made available for such cases. It helps you readily meet your needs to buy farming equipment, seeds, and insecticides, among other things.  

TOPICS

was this article helpful?

Awesome! Please let us know why?

Awesome! Please let us know why? aaaaaaaaa

Awesome! Please let us know why? bbbbbb

Awesome! Please let us know why? hhhhhhhh

Awesome! Please let us know why? cccccccc

Awesome! Please let us know why? tttttt

This is a 2-minute read.

50 people have shared this article.