Many people make use of loans for emergency needs. In India there are various types of loans available from personal loans to vacation loans. However, using the right loan for appropriate use is the key. The rate of interest for a car loan is higher than home loan. Likewise personal loan interest rates and charges are higher than home loan. It is crucial to analyze the need for loan and accordingly apply for one. Here is the list of different types of loan available in India and their benefits:
- Home Loan:
This loan is provided by banks in order to buy a property/ home for personal use or for letting out. In India many individuals take the route of home loan as it will help in financing for big projects and will also offer tax benefits. Just like the individuals paying a monthly rent for their space, the amount can be invested in buying a property while using it. Housing is a major investment that allows a family to cut down on much other expenditure.
The potential homeowner must first look out for the family’s monthly income and then look out for a loan which is generous so that he need not spend his entire life repaying the loan. Home loan are made available to ensure people find it affordable to buy homes anywhere in India. The rate of interest and other charges are comparatively low and government is encouraging individuals to make use of this loan option for investment.
There are many types of home loan available in India which is used for various purposes:
- Home loan for residents
- Top-up loans
- Land purchase loan
- Loans for repairs and extension
- Reverse Mortgage Loans
- EMD loans – Loan for Earnest Money Deposits
- Loan against property
- Land Purchase Loan
Home loans amount totally depends on the requirement; however there is limit is loan amount which is ranging from Rs.2 lac to Rs.200 lac, and this is calculated on applicant’s eligibility, repayment capacity and income.
This helps in capital appreciation; there is no doubt property prices have boomed in the past 5 years. Investment in home is always a safe and smart move. The value of land always increases and thus appreciation for your investment can be visibly seen within few years.
- Personal Loan:
This type of loans is granted by banks to help individuals to cover any emergency expenses. This can be used for medical assistance, wedding requirements, buying gadgets, air ticket booking for vacations and more. Some people make use of personal loans purely for emergency needs while others make use of this for additional shopping and luxuries causes. In simple, banks will not restrict anyone for not using the money for investment purpose. However, it is not advisable to take personal loan for non-investments. Personal loan will turn beneficial only when there is return on the amount from the investment made and when the return is higher than the rate of interest paid for the loan.
There are mainly 2 types of personal loans:
- Secured loans:
- Unsecured loans:
- Car or Vehicle Loan:
Just as the name states, this loan is made available to meet the financial requirements in owning a car/ vehicle. As this is not considered as a basic necessity the rate of interest on vehicles loans is high as compared to other types of loans. Car loans / vehicle loans are usually secured i.e. in case if the borrower fails to repay the loan amount on the vehicle, banks will take ownership of the asset. Basically, lender has every right to recover back the approved loan amount by ceasing the vehicle in case if the borrower defaults to make payments.
- Education Loan:
This loan is very beneficial for those who are keen to have higher education and are struggling due to financial availability. This type of loan is a handy tool for many parents and students who are not planned for education without scholarship. The benefit of education loan is this has to be repaid only after the student is done with the course and has started to earn. Again the rate of interest is low and tax benefits are made available on the same.
- Gold Loan:
This type of loan is very beneficial when the gold rates are high. It is basically, simple pledging of gold for immediate fund. This is considered as the fastest and easy liquid-able form of asset. However, the risk factor associated with this type of loan is safety of the asset. In case of theft of other disasters, the NBFCs might not be able to replace the ornaments that were pledged. There are quite a lot of examples of such mishaps.
- Business Loan:
Loan approved purely for business purposes are considered as business loan. Those who are looking for finance to start up their business can choose this type of loan. Even for working capital and additional funding for business this type of loan can be used.
Some of the types of business loans are:
- Secured Business Loan
- Unsecured Business Loan
- Small Business Loan
- Startup Loans
- Working Capital Loan
- Equipment Financing
- Installment Loans
- Balloon Loans
- Interim Loans
- Letter of Credit
- Alternative Financing
There are two main types of interest- Fixed and floating rate of interest. In simple, it can be said that there is loan available in this country for any type of needs. But how much you earn will determine how much you can get. The place you live in will determine what should be your loan amount and EMI value. Living in expensive cities will attract more interest and charges. Bank will scrutinize every aspect of your income and expenditure to check what percentage of your income is available to repay the loan amount. For this they need your salary slips, bank statements, employer authentication and more. Make the most use of these types of loans available in India in case of any needs.