There are a wide range of loan categories available in India to meet various financial needs. These loans help individuals and businesses manage their finances better. Understanding the types of loans available can help borrowers choose the most suitable one for their situation. Below are the most common types of loans in India.
Personal Loans
A personal loan is designed to meet any individual financial need, without requiring you to state a specific reason for borrowing. Both banks and Non-banking Financial Companies (NBFCs) offer these loans, typically with a tenure of 1 to 5 years, and repayment is done through monthly instalments. Since no collateral is needed, personal loans fall under the unsecured category, which often results in higher interest rates. You can apply for a personal loan either through an instant loan app or by visiting a lender.
Loans
A home loan allows you to finance the purchase or construction of a house, and it can also be used to buy land or make property renovations. Since it’s a secured loan, collateral is required, with the property serving as security. The tenure can extend up to 40 years, offering lower interest rates compared to personal loans. Borrowers have the option to choose between fixed or floating interest rates—fixed rates stay unchanged throughout the loan period, while floating rates vary with market fluctuations.
Car Loans
Car loans allow you to finance the purchase of a new or used vehicle. These secured loans use the car itself as collateral. Many banks and NBFCs provide car loans with a tenure of up to 7 years. Due to the collateral, interest rates tend to be lower compared to personal loans. You can apply for a car loan through a financial institution or through an online financial marketplace such as Bajaj Markets.
Education Loans
An education loan provides financial support for higher studies, whether in India or abroad. Students use these loans to cover tuition fees, accommodation, and other educational expenses. Repayment typically begins after the student completes their course, with a tenure of up to 15 years. Loans for students attending reputable institutions may offer lower interest rates. For larger loan amounts, collateral might be required.
Gold Loans
Gold loans allow you to borrow funds by pledging your gold jewellery as collateral. The loan amount is determined by the value of the gold. Being a secured loan, it comes with lower interest rates. The tenure is typically short, ranging from a few months to a few years. Gold loans are usually easy to obtain, requiring minimal paperwork, making them ideal for short-term financial needs. Repayment can be done through monthly instalments or as a lump sum.
Business Loans
Business loans are tailored to support various business needs, such as launching a new venture or expanding an existing one. They can also be used for working capital or purchasing machinery. These loans can be either secured or unsecured. Secured loans require collateral like property or equipment, while unsecured loans do not, but typically come with higher interest rates. The tenure of a business loan depends on the loan amount and its purpose. Many business owners opt to apply through online portals or via an Instant Loan App for convenience.
Loan Against Property (LAP)
A Loan Against Property (LAP) enables you to obtain funds by offering your residential or commercial property as collateral. As a secured loan, it generally offers lower interest rates. The loan amount is based on the value of the property, with a tenure that can extend up to 15 years. These funds can be used for a variety of purposes, including education, medical costs, or business expenses.
Credit Card Loans
Many credit cards offer the option to borrow against your available credit limit. These pre-approved loans require no extra paperwork and typically have a short tenure, ranging from 6 to 24 months. While convenient, credit card loans often carry high interest rates, making them suitable for emergencies when you need quick access to funds.
Two-wheeler Loans
Two-wheeler loans help finance the purchase of a new or used bike or scooter. Similar to car loans, they are secured with the vehicle serving as collateral. The loan tenure typically extends up to 5 years. These loans come with low interest rates and require minimal documentation. Many lenders provide two-wheeler loans through both online and offline platforms.
Agriculture Loans
Agriculture loans support farmers in financing a range of activities, such as purchasing seeds, fertilisers, or machinery. They can also be used for irrigation and storage requirements. These loans typically offer lower interest rates and favourable terms. The loan tenure varies based on the crop cycle or specific farming activities.
Overdrafts
An overdraft enables you to withdraw more funds than your account balance. Banks typically provide overdrafts secured by fixed deposits, savings accounts, or property, with the limit determined by the collateral’s value. Interest is applied only to the amount withdrawn, not the full limit. Overdrafts offer flexibility, making them ideal for short-term financial requirements.
Microfinance Loans
Microfinance loans are small loans targeted at low-income individuals. They are designed to support small businesses, agriculture, or personal needs. Offered by microfinance institutions at low interest rates, these loans typically have a short tenure, usually up to 2 years. With simple eligibility criteria and minimal documentation, they are accessible to those with limited financial resources.
Top-up Loans
A top-up loan is an extra loan taken alongside an existing one. For instance, if you already have a home loan, you can secure a top-up loan to cover personal expenses. The tenure of the top-up loan typically matches that of the original loan. These loans come with lower interest rates since they are backed by the same collateral. They are well-suited for funding home renovations or educational costs.
Conclusion
India provides a wide range of loan options to suit various needs, whether for personal, business, or agricultural purposes. You can access these loans through banks, NBFCs, or online platforms like the financial marketplace by Bajaj Markets. Opting for an instant loan app can further simplify and expedite the process. It’s essential to select a loan that aligns with your repayment capacity and long-term financial goals.