A loan is when someone borrows money from a bank, a friend, or another financial institution with the promise of repaying it in the future, along with the principal amount and interest charges. There are different types of loans available in India which are discussed one by one below.
Principle amount – Amount you borrowed.
Interest charges – The interest charge is a percent of the borrowed principal amount that a lender charges a borrower for providing a loan.
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Types of loans available in India
There are various types of loans available in India classified into secured and unsecured loans.
Secured Loans
- Secured loans are financial institution-issued loans that demand a security deposit or collateral in exchange for the loan.
- A secured loan includes things like a loan against your home, a car, gold, any property, etc.
- These assets provide lenders with assurance if a loan is not repaid. These are a good way to accumulate large quantities of money.
Unsecured Loans
- Unsecured loans are short-term loans that are not backed by any collateral.
- These are usually granted based on your credit score, credit history, and financial situation.
- Credit cards, personal loans, are examples of unsecured loans.
- Because of the enormous risk associated with this type of borrowing, the interest rate is greater.
Types of Secured loans
Mortgage loans – These are the largest loans that may be obtained. If you want to buy your first home or other real estate, this loan is a good option. The company you’re buying from will guarantee your mortgage loan.
Home-equity loan – These loans allow homeowners to borrow against the equity in their houses. The difference between the appraised home value and the amount you owe on your mortgage is the loan amount.
Car loans – A car loan is a sum of money borrowed by a customer from a bank or other financial organization to achieve his or her desire of owning a car. You commit to returning the agreed-upon loan amount plus interest at a set rate in exchange. The bank pays the vehicle’s dealer in full, and you, as a customer, continue paying the bank over time, plus interest and any additional fees.
Two-wheeler loans – It works on the same principle as a car loan, a two-wheeler loan is identical to one. Because two-wheelers are one of the most common ways of transportation, they have minimal down payments and interest rates, allowing millions of individuals throughout the world to obtain two-wheeler loans. A two-wheeler loan can be obtained with as little as a 5% down payment and as much as a 20% down payment.
Types of unsecured loans
Personal Loan – Personal loans are widely offered from a variety of financial institutions. Personal loans provide you the freedom to spend your money any way you wish.
Various types of personal loans available are:
- Wedding loan
- Travel loan
- Home renovation loan
- Education loan
- Pension loans
- Festival loans
- Consumer Durable loans
- Shopping loans
There is a various application that provides these loans to know these loan applications “click here”.
Credit Card Loan –This is for those who require immediate financial assistance. A credit card company or any financial institution can provide you with this type of loan. This is a straightforward credit with a high rate of interest.
What makes loans so crucial?
- It’s essential to understand that the loan is a commitment. This signifies that the lender has custody of the company’s assets.
- On a company’s balance sheet, a loan re-payment due in one year from full payback is usually classified as short-term debt.
- Long-term debt is a loan taken for more than one year.
- Data on a person’s or a company’s debt is important for making an accurate financial report.
- Too much debt on your credit reports will almost certainly harm a company’s or individual’s credit for years to come.
FAQs
1). What are the various types of loans available?
The different types of loans available are:
- Personal Loans
- Cash Advances or Credit card loans
- Student Loans
- Mortgage Loans
- Home-equity loans
- Car loans
- Two-wheeler loans
2). Is It possible to get a loan without a bank account?
No, you can’t get a loan without a bank account, the bank account is necessary.
3). What is collateral security?
Collateral is additional security you give with interest charges against which you get secured loans.
4). Why it is better to pay loans early?
If you pay your loans early it makes your credit score better and helps to maintain a good credit report which helps you to get more loans in the future.
5). What is a loan against property?
This means mortgage your property to avail of a loan to finance business or other requirements.
