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Different Types of Bank Loans in India

 When you borrow money from a lender such as Banks or NBFCs against collateral to fulfill your important needs, it is called a loan. They offer you the loan against the condition that you will repay their amount with an interest rate within the specified tenure. They give you additional time to repay the loan but if you fail again then, they have the right to seize your collateral.

Types of loan

Security-Based

·        Secured Loans

It is a type of loan where a borrower has to submit security such as land to the financial institution to avail of a loan. It is called a secured loan because security as collateral is involved in it. If the borrower is unable to repay the loan, the bank or NBFCs has the right to use the collateral to recover their amount. The interest rate for secured loans is less than unsecured loans.

·        Unsecured Loans

Unsecured loans are those that do not require any collateral for repaying the loan. The bank reviews past relationships with the lender, credit score, and other factors to determine whether the loan will be disbursed or not. The interest rate for such a loan may be higher as there is no way to recoup the loan if the borrower is paying it off.

Depending on the Purpose

·        Education Loan

It is a loan that enables the borrower to pursue their higher education. The study program can be a bachelor's degree, postgraduate, or any other degree/certification from a reputable school/university. To receive an education loan you have to submit the college or university admission letter certificate to the financial institution. Education loans are given to both domestic and international courses.

·        Personal Loan

Whenever there is a financial issue then, you can opt for a personal loan. The purpose of borrowing a loan can be anything from repaying debts, going on vacation, money for renting a house/car, as well as medical emergencies, or for wedding purposes. Personal loans are offered to applicants with a good credit score.

·        Vehicle Loan

If you don't have money to purchase a car or a bike then you can avail a Vehicle Loan. You can avail of vehicle loans from two-wheeler loans or four-wheeler loan schemes depending upon your requirements. The vehicle will be owned by the financial institution until the loan repayment is made.

·        Home Loan

If you want to build or buy your own house then you can avail Home Loan to raise money. The interest rate on home loans is higher. The application process and loan disbursal of home loans take a good amount of time.

Assets Based

·        Gold loan

Many financial institutions offer loans against gold as collateral. The gold loan can be availed easily within a few days. The lender evaluates the gold and then calculates the amount offered based on several tests of purity and other factors.

Loans must be repaid in installments on a monthly basis so that the loan can be repaid at the end of this period and the gold can be taken back by the borrower.

·        Loan Against Assets

You can get loans on your pledged assets such as insurance policies, FD certificates, mutual funds, shares, bonds, and other assets to lend money. Depending on the value of the secured assets, the lender will provide a loan with a small margin. The borrower has to repay the loan in time so that he can keep the collateral at the end of the term.

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