In the modern world, loan is no longer an unknown term. People opt for loans for many purposes. It can be for marriage, travel, buying a house, higher education, and many other reasons. If we discuss what a loan is or what is the meaning of loan then basically, a loan is an amount of money taken from a person or organization which we use to manage some unexpected expenses or deal with financial emergencies. When a person borrows money from a bank or any other financial institution to fulfill his needs, it is called a loan. The borrower has to repay the loan amount along with interest to the lender in a fixed time interval. There can be many reasons for taking a loan, such as building your own house, buying a car, doing business or education etc.
Term Loans - Types of Term Loans
Term loan means a specified amount of money given for a fixed period usually between one to ten years and to be paid back with interest. Let us further discuss how many types of personal loans are there. Term loans are classified into three main categories: short term loans, intermediate term loans and long term loans. This classification depends on the period of time i.e. the duration for which the money is lent. Short term loans can be for buying household appliances or long term loans can be for buying a house or intermediate term loans can be for buying a car. Short term loans or short term loans: This loan is mainly taken to meet unexpected cash shortages. The repayment period in this loan is 1 year or even less than 1 year. Medium term loans or intermediate term loans: This is taken for a planned purpose with a period of 1 to 5 years. Long term loans or long term loans: A loan in which the repayment period is 3 years or more. Only secured loans are included in this.
Types of Loans in India
There are many different types of loans available in India, which are divided into two categories based on the purpose of the loan:
Secured Loans
Secured loans must be backed by a mortgage equal to the amount borrowed. The collateral is secured property to operate as the lender's right which can be seized if the borrower fails to repay the loan. Compared to unsecured loans, these loans have lower interest rates. Secured loans are further divided into the following categories, which will give you an idea of how many types of loans there are. Such as gold loans, loan against securities, property loans, home loans, corporate/business loans
Gold Loan
Gold has long been considered one of the most popular asset classes. For a gold loan, you have to pledge gold jewelers or coins as security.
Loan Against Securities (LAS)
A loan against securities is a loan in which you pledge your shares, mutual funds or life insurance policies as collateral to the bank against your loan amount. A loan against securities is usually offered as an overdraft facility in your account after you deposit your securities.
Loan Against Property (LAP)
One of the most common types of secured loans is a loan against property. To obtain the required finance, you can mortgage any residential, commercial or industrial property. The loan amount offered varies by lender and is equal to a particular percentage of the property value.
Home Loan
A home loan is a type of secured credit that allows you to buy or build your dream home. Following are the types of home loans offered in India:
- You will need finance to purchase land for your new home.
- Building a new house will require finances.
- For renovation of an existing home or for a new home.
Corporate/Business Loans
Corporate/business loans are offered to small and medium-sized firms to help them meet a variety of needs. These loans can be used for a variety of things that help a company flourish such as buying equipment, purchasing inventory, paying employee salaries, marketing expenses, paying off business debts , paying administrative expenses, and even starting a new branch.
Unsecured Loans
Financial institutions offer different types of loans without any collateral depending on various factors such as repayment history, borrower's credit score and other considerations. However, these types of loans have higher interest rates in India compared to other loans. Following are several forms of unsecured loans that you can use for your needs.
Personal Loan
A personal loan is one of the most common unsecured types of loans that provide quick cash. It is available at a higher interest rate than a secured loan because it is an unsecured loan. If you have a good credit score and a high and consistent income then you can get this loan at a cheaper interest rate. Personal loans can be used for a variety of things, including: for wedding expenses, for holidays or foreign travel, for education loans, etc.
We have seen what a loan is and how many types there are. A loan allows a person to get financial support and fulfill his needs. There are many types of personal loans, such as general personal loans, car loans, home loans, etc. Each of these types has its own features and its use depends on the needs of the person. Along with this, online loan application has become easy in the modern world. This system makes applying for a loan easy and fast. The online process involves you filling up the prescribed form, submitting the required documents and your loan is approved by the appropriate financial institution.
frequently Asked question
1. How to get a personal loan instantly?
To get a personal loan instantly, contact your bank or financial institution, keep the required documents ready and follow their procedure.
2. How much loan can be availed on Aadhaar card?
The amount of loan on Aadhaar card will depend on the financial institution and your income. Usually, you can get a loan of up to Rs 50,000 on Aadhaar card.
3. How much loan can be availed on 10th marksheet?
10th marksheet is not a valid document for the loan process. You will have to submit other relevant documents that can prove your employment, financial status and repayment capacity.
4. Can a student get a personal loan in India?
Yes, students in India can get a personal loan. Many financial institutions provide personal loans to students for education, which can help them meet their needs. But for this you have to contact your financial institution and follow their terms and procedures.
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