Understanding different types of loans: personal, home, education and more – CNBC tv18

Loans provide financial assistance by enabling people or organizations to borrow a certain amount, which must be paid back in a predetermined period with interest. Banks offer different types of loan options with different features, benefits and obstacles. The loan is divided into two categories: safe loan and unprotected loans, depending on their intended use.

Here, we will see some of the most popular debt types that provide banks.

Loans available in India

Safe credit you need to vow to a property as collateral. They often provide high lending limits and low interest rates. Some examples include home loans, car loans, gold loans, etc.

home loan

Home loans enable borrowers to buy real estate, such as a house, which serves as a collateral. Their duration is usually from 15 to 30 years, depending on the ability of the lender and the borrower to repay. Home loan interest rates are different, but often between 8.40% and 15% annually.

Vehicle loan

Vehicles are intended to procure automobiles, motorcycles or trucks, which act as collateral. Lenders provide loans up to 85% of the pre-showroom price of the vehicle. Depending on their debt conditions and credit scores, borrowers can avail appropriate interest rates and flexible tenure.

Gold loan

Lenders as borrower collateral can get gold loan by offering gold jewelery or jewelry. Gold loans typically have an annual interest rate between 8% and 18%. Gold loans are usually used for short -term purposes and have a short repayment period.

Loan against security

Borrowers can use their securities including mutual funds, stocks and insurance policies, without selling them as collateral for such loan. Lenders usually approved a loan of up to 85% loan fund and up to 65% of eligible shares and equity funds of net asset values.

Loan against property (lap)

Loan against property (LAP) is a safe loan that enables borrowers to raise funds for any kind of requirement using their property as collateral. The current lap interest rate depends on several parameters such as credit score, term and loan amount, which varies from 8.40% to 12.50% per year.

Unsecured loans available in India

Unsecured loans do not require any collateral. The lender checks your income and credit score to determine your eligibility. Although unprotected loans do not risk your assets, they often provide a lower lending limit than high interest rates and safe loans. Two popular types of unsafe loans are credit cards and individual loans.

personal loan

These unsafe loans can be used for any individual or professional purpose, including debt consolidation, medical cost, education, travel, weddings and home improvement. Personal loan interest rates vary from 8 to 15% annually and are determined by the borrower’s income, tenure, loan amount and credit score.

Education loan

Education loans provide funds for higher education, including tuition, living expenses and other affiliated costs. These debt help students, while they are studying by providing flexible repayment plans and adjournment periods. They usually have interest rates of 8–16% per year.

credit card debt

Credit card loans may be available to current card holders based on their credit limit and repayment history. Credit card loans usually have higher interest rates than individual loans, with some cards the annual interest rate of 53%.

Short -term business loan

Short -term trade loans can be used to cover everyday expenses and expansion of various companies and institutions. Entrepreneurs and business owners can choose to use this unsafe loan for working capital, business expansion, or equipment needs.

Flexi loan

Flexi loan borrowers enable borrowers to use funds through credit line feature or to use funds via overdraft to predetermined limits. However, interest is assessed only on the amount used by the borrower, not on the entire amount that the lender has approved.