Loans can be utilised for various things in today’s world. It can be used for funding a start-up to buying appliances for your newly purchased house. Let us talk about the different types of loans available in the market and their specific characteristics that make these loans useful to the customers.
Most banks offer personal loans to their customers and the money can be used for any expense like paying a bill or purchasing a new television. Generally, these loans are unsecured loans. The lender or the bank needs certain documents like proof of assets, proof on income, etc. before approving the personal loan amount. The borrower must have enough assets or income to repay the loan. In case of personal loans, the application is 1 or 2 pages in length. The borrower gets to know about the denial or approval of the loan within a couple of days.
You must remember that the rate of interest associated with these loans can be on the higher side. The tenure of these loans is not that long. So, if you borrow a big amount, it can be difficult for you to repay without planning your finances properly.
Personal loans can prove to be of great help when you wish to take a small loan and repay it as soon as possible.
When you are using a credit card, you must understand that you will have to repay for all the purchases you make at the end of the billing cycle. Credit cards are accepted almost everywhere, even when you are travelling abroad. As it is one of the most convenient ways to pay for the things you buy, it has become a popular loan type.
In order to apply and avail a credit card, all you need to do is fill out a simple application form provided by the card issuer. You can also choose to apply for a credit card online. These plastic cards come with great rewards and benefits. It’s the loan where you need to repay on time but you are also handsomely rewarded for using it.
Obviously, there are pitfalls associated with this type of loan. You must understand that there is a high amount of interest on the amounts you borrow on your credit card. If you do not pay your credit card bills on time, the interests will keep piling and might be difficult for you to manage your finances with the rising outstanding balance. But if you use a credit card wisely and clear all your debts on time, it can definitely prove to your best friend in your pocket.
When you wish to purchase a house, a home loan can help you to a great extent. It provides you the financial support and helps you buy the house for yourself and your loved ones. These loan generally come with longer tenures (20 years to 30 years). The rate offered by some of the top banks in India with their home loans start at 8.30%. Your credit score is checked before the loan request is approved by the lender. If you have a good credit score, there is a fair chance that you will be able to enjoy lower rates of interest with your home loan.
Home loans are primarily taken for buying new homes. However, these loan can also be used for home renovations, home extensions, purchasing land property, under-construction houses, etc.
Some of the types of home loan that are available in the market include home loans for repair and extension, top-up loans, land purchase loan, loan against property, etc.
Buying a car can definitely instil a great sense of joy and happiness in you. A car will remain as your asset and it is going to be one of the biggest investments that you make. A car loan helps you to pave the path between your dream of owning a car and actually buying your car. Since credit reports are crucial for judging your eligibility towards any loan, it is good to have a high credit score when you apply for a car loan. The loan application will get approved easily and you might get a lower rate of interest associated with the loan.
Car loans are secured loans. If you fail to pay your instalments, the lender will take back your car and recover the outstanding debt.
A two-wheeler is pretty essential in today’s world. May it be going for a long ride or a busy road in a city – bikes and scooters help you to commute conveniently. A two-wheeler loan is easy to apply for. This amount you borrow under this loan type helps you to purchase a two-wheeler. But if you do not pay the instalments on time and clear your debt, the insurer will take your two-wheeler to recover the loan amount.
If you wish to get higher education in a reputed university in a different country, education loans can help you a lot. These loans are opted by students who wish to study further but need financial support for pursuing the courses. An education loan covers expenses like college/university fees, library charges, travel costs related to their course, etc.
In order to be eligible for an education loan, you must submit all the required documents including invitation letter from the university, educational qualification certificates, etc.
If your insurance scheme is eligible for a loan, you can avail the loan amount from your insurer. You may also use the investment for insurance as collateral. Generally, loans cannot be availed right from the commencement of the insurance policy. After 3 years into the scheme, you can apply for a loan.
This is a type of loan where your fixed deposit is the collateral. For example, if you have a fixed deposit of Rs.10 lakh in the bank, you can avail a loan of up to Rs.8 lakh. However, the rate of interest associated with this kind of a loan is usually higher than the fixed deposit rate.
Certain lenders provide loan against your mutual fund value and share value. However, you will not be able to borrow huge amounts under this type of loans.
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