| December 09
How many types of loans are there?
Loans are simply the money borrowed with a promise to return the principal and the interest amount levied on the same. A consumer may require additional funds for purposes like purchase of property, business expansion, general living expenses, higher education, etc.
In India, there is a range of loans available from different Banks and NBFCs which provides the consumers with plenty of options.
They can be categorized based on two major factors-secured or unsecured and their objective.
1. Secured Loans
a. Home Loans: The consumer can apply for loans to purchase land, construct the building, and any other top up loan.
b. Loan Against Property: Pledging of residential, commercial, or industrial property for the sake of borrowing funds is known as LAP. This is one of the most common forms of loan.
c. Loan Against Insurance Policy: The insurance policies which have a maturity value can be used to apply for loans.
d. Loan against Securities: The basket of your mutual funds or equity can be offered as collateral to apply for loans.
e. Gold Loans: Indians have been investing in gold jewelry and coins for some time. This not only helps the building of a secured asset but can be used as a security against loan issuance.
f. Loan against fixed deposit: One can easily get the funding against the simple fixed deposit to the extent of 70-90% of its value.
2. Unsecured Loans
1. Personal Loan: These are unsecured higher interest-bearingloans offered to the consumers for any purpose like meeting unexpected expenses, manage a family-related budget, etc.
2. Small Business Loan: This is similar to the personal loan but the objective for usage is business-related like ensuring working capital, buying machinery, etc.
3. Based on their objectives
- Educational Loans: The students can apply for this kind of loan to boost their career to the next level. This usually covers course fees, accommodation expenses, exam fees, etc.
- Vehicle Loans: To buy the vehicle of your choice, consumers often take the help of loans. Such credit is provided based on the credit score, the ratio of debt to income, loan tenor, etc.