As humans, we wish for a lot of things at different points in our lives. It could be anything from buying new clothes to studying abroad to owning a home. While some are easy on the pocket, others are out of our budget and require us to take financial help. One of the best options to fund your dreams is to take a loan.
Loans broadly fall into two categories – secured and unsecured loans. Secured loans require collateral, which means that you will have to provide an asset to the lender as security for the money being borrowed. If you’re not able to repay the loan, the lender uses this to get back their money. In case a borrower is unable to complete the repayment due to unavoidable circumstances, the lender can use the collateral to secure the unpaid amount. Unsecured loans don’t require collateral. It is given based on the credit score and personal history.
When the need arises to apply for a loan, it might be a bit confusing to find the best one given all the options. Understanding the different types of loans will help you find the one that suits your needs best. Here are five different types of loans and when how to apply for them.
There are many different types of loans that are offered by banks – business loans, student loans, auto loans, etc.
A business loan is taken to meet some urgent financial needs in your venture. This can be to buy new equipment, upgrade the office space, or even to start a new business. The interest rate starts at 13.50% per annum. There are many factors that determine your eligibility to get a business loan. The exact requirements differ from bank-to-bank.
- Net income to be more than ₹150,000 p.a.for a loan up to ₹1,500,000 and more than ₹300,000 for a loan above ₹1,500,000.
- The applicant taking the loan must be a self-employed professional.
- The minimum age is 21 in most banks and the maximum age is 65.
- The business should be making a profit for a minimum of 2 years.
Among the different types of bank loans, a student loan is among the most sought after. A student loan is taken to monetarily support a child’s education. They are offered for higher education in India and abroad. The interest rates start with 8.05% p.a.
- The student must be an Indian citizen or NRI.
- The loan applicant must be above the age of 18 otherwise the parent can avail it.
- The applicant must have secured admission to a recognized foreign university/institution/college.
An Auto loan is taken to make the dream of owning a vehicle come true. This is mostly availed to purchase a car. The interest rate on this loan is 7.70% per annum onwards.
- The minimum age to apply for the loan is 18 years.
- Must have a minimum annual income of Rs. 3 Lakhs
- Must be a resident of India
Mortgage Loan or Loan against Property
This is a secured loan that is availed by pledging a residential or commercial property as a mortgage. Different types of mortgages can be taken for any purpose like emergencies, education abroad, weddings business, etc. This is a secured loan as the property is taken as collateral. The property’s value determines the value of the loan you are eligible to take. Past credit history also plays a crucial role in determining eligibility.
The interest rates of different types of mortgages depend on the lender. You can avail a loan that is up to 60 percent of the property’s market value. This loan can be taken by businessmen and salaried professionals.
This is an unsecured loan where the lender does not expect collateral and gives the flexibility to use the funds for any purpose. It could be for your travel plans, medical emergencies, big purchases, weddings, or even buying a vehicle. The difference between a personal loan and an auto loan is that in the auto loan your vehicle becomes the collateral and can only be used to buy a vehicle. These can be taken from a bank or a non-banking financial company. The interest rates can vary based on the institution and also depends on your credit score. Usually, the interest rates are on the higher side as this is an unsecured loan. Defaulting here can have a big impact on your CIBIL score. The eligibility criteria to avail this can differ from lender-to-lender but broadly, these are the factors that are considered.
- The minimum age limit ranges from 21 – 28 years
- The maximum age limit ranges from 58 – 68 years
- The individual must be a salaried professional, a business owner, self-employed professional, retired, student & homemaker.
- Minimum CIBIL score of 650 is required for personal loans
One can avail this loan from pawnshops by pledging collateral in exchange for money. Pawnbrokers lend money on numerous things like gold, property, jewellery, electronics, vehicles, etc. The value of the product is assessed and then the sum that can be lent is decided. This is the fastest way to borrow money. Failing to pay back would mean that the product being pawned will be sold. Interest rates vary on a case-to-case basis but are usually very high. Despite the risks involved many people use this option because of the instant nature of the loan and the loan to value ratio.
This loan as the name suggests is given against gold. This can be used for any purpose ranging from funding for medical emergencies, education, starting up a business etc. Unlike the other categories, this type of loan is usually considered a more attractive borrowing option because of the fewer documentation requirements, lower gold loan interest rates, high loan to value ratio, quick processing and credit score is not required. These are a few among the many benefits of gold loans. One of the most important points to remember when applying for a gold loan is to choose a reliable vendor.
While one might choose the type of loan to go for based on the need, the benefits of each of them are crucial to understanding which would be the best option to go for. Here is a complete breakdown of the different types of loans.
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The numerous advantages and flexibility make gold loans the best option to go for among the different types of loans. Whatever be the need, be it purchasing a photocopy machine, starting a new business, renovating your home or even going on that vacation you have always been wanting to go on, a gold loan could help your dream come to life. This is very beneficial to salaried professionals, students, small business owners, and homemakers. The only factor one must have in mind is to have in mind the credibility of the lender since you are trusting your gold with them. Rupeek is one of the safest options to go for. You can be assured of the lowest interest rates in the market and the convenience of having doorstep service. With Rupeek, your wishes and dreams can come true.