Banks lend loan for a specific period at a fixed interest rate. The borrower needs to pay back the money, which includes the rate of interest as well as the principal amount. From buying houses to set up a business, loans can be used for several reasons. Loans fulfill your desires, which your savings and income cannot.
Different loans are tailored in different ways for separate needs. In this guide, we will be talking about the different types of loans offers by banks in India.
1. Home Loan
Owning a house is everyone’s dream and is the most important decision of one’s life. If you wish to have a house of your dream, but lack the required amount, don’t be worried. Several banks and financial firms offer you home loans at a reasonable rate of interest. In the case of home loans, the tenure is usually longer, say 20 to 30 years.
Some of the leading banks of India offer home loans at an interest of 8.30%. Before approving your loan, the lender checks the credit score. If you’re lucky and your credit score is good, you might crack a fair deal at a lower rate of interest.
2. Small Business Loan
Are you planning to establish a business? You might want to start with a small one. Don’t panic if you do not possess the optimum amount to set up a business. Small business loans offered by banks have got your back. Whatever maybe your business requirement, you can avail of small business loans.
Though the criteria for eligibility vary from bank to bank, here are some of the common criteria such as IT returns, age, turnover of the previous year audited by a CA, and about the operational period of the business. Whether you need paying business debts, paying employees, purchase equipment, administrative expenses, buying inventory, or setting up a new branch, everything can be covered under this.
3. Personal Loan
A personal loan comes under the category of unsecured loans, which signifies, one has to pay a higher rate of interest for it. The reason for borrowing the loan can be anything. Whether you want to use it for vacation expenditure, paying debt, or marriage expenses, it is totally your call. Also, the bank wouldn’t ask for any collateral security.
The tenure of such loans might vary from 1 to 5 years based completely on the EMI and the principal amount. The rate of interest varies from one bank to another. It might range from 15% to 28%.
4. Education Loan
In today’s world, parents have to spend a huge deal of money to send their children to universities. And in most cases, parents are not able to pay the amount even if they save their whole lives. However, to reduce the burden from their shoulder, banks are providing education loans.
Even though the loan for disbursement has been fixed by the RBI, banks have the power to either increase or decrease it considering the institution. The tenure ranges from 10 to 15 years based on the amount of loan. Repayment begins around 6 months or 2 years after the completion of the course. An early repayment is also an option, and there are no extra charges associated with it.
5. Gold Loan
This works when you keep gold as security at the bank, and in exchange for that, they provide you with money. Considering the security, it’s termed as the safest way of taking a loan. They can provide as high as 25 lakhs in exchange for gold as security. The tenure varies from one bank to another. It can range from 1 day to 2 years. Also, the interest charged is between 14% to 24%, which depends entirely upon the institution. You get the convenience of paying off the entire debt whenever you want during the tenure.
6. Car loans
Buying a car can take a toll on your lifetime savings. Why do you have to step into a financial crisis when you have the option of taking a loan? However, there are some eligibility criteria that you must fulfill to be able to take the loan. And credit score remains one such important criteria. Whether you are getting a loan or not depends entirely upon the credit score. Apart from getting the loan, a good credit score also provides a low rate of interest. In case you cannot pay the loan back, your car will be taken back by the bank, hence, recovering the unpaid amount.
Most of the banks provide all the loans that we have just discussed. Taking a loan is a far better option than borrowing money from your friends or relatives. By taking money from your relatives, you put your relationship with them at risk. So, instead of indulging in all such complexities, it’s better to choose the easier path.