Different types of loans offered by Commercial Banks in India
Home Loan: A Home Loan is an amount of money borrowed by an individual usually from banks for purchasing a Flat or House. The borrower has to repay the loan amount with interest in equated monthly installments or EMI over a period of time that can range from 10-30 years, depending on the nature of the loan.
The different types of Home Loans offered by commercial banks in India are:
- Home Purchase Loan: This is the loan taken by the burrower for purchasing Home.
- Land Purchase Loan: This is the loan taken by the burrower for purchasing Land.
- Home Construction Loan: This is the loan taken by the burrower for construction of Home.
- Home Improvement Loan: This is the loan taken by the burrower for renovation of home or house
- Home extension Loan: This is the loan taken by the burrower built up space of home or house
Personal Loan: Personal Loan is given to individuals after accessing their credentials based on their profession or business or any other sources of income. The loan can be used for any purpose for example, paying debt, marriage expenses or vacation expenditure. No collateral is required for this type of loan. The span of personal loan repayment varies depending upon the principal amount and the EMI’s. The interest rate ranges from 15% to 28% varying from bank to bank. Approximately 2% of the total loan amount is charged as the loan processing fee. The EMI starts once the disbursement of loan has been made.
Educational Loan: An educational loan is a sum of money borrowed to finance College or other Education related expenses. Educational loans are issued for the purpose of attending an academic institution and obtaining an academic degree. Education loans can be obtained from the government or from private sector loan sources. Government sector loan sources often offer lower interest rates and some also offer subsidized interest. Private sector loans generally follow more of a traditional loan application process with rates typically higher than government loans.
Business Loan: Business loans are financial assistance provided by banks and NBFC (Non banking Financial Companies) in India. The main objective of this loan is to support the urgent needs of growing business. Most financial institutions offer term loans and flexible loans to meet the needs of a company. All types of companies, such as a sole proprietorship, a private company, associated companies, freelancers and retailers can take advantage of these loans.
Vehicle Loan: Vehicle Loan (also known as a car loan) is a sum of money that a consumer borrows to buy a vehicle/car/two wheeler. Generally speaking, a vehicle loan is an amount of money that is lent to an entity to buy vehicle/car/two wheeler .The party that lends the money is known as the lender, while the party that burrow the money is called the borrower. When applying for a loan, the borrower agrees to pay the full amount of the loan, as well as any interest (a percentage of the loan amount, generally calculated annually) on a specified date, generally making monthly payments or EMI.
Gold Loan: Gold loans are loans where gold jewelry is used as collateral. You deposit your gold jewelry as collateral with the lender and get a loan. The loan amount is usually a percentage of the value of the gold. You can repay the loan through monthly installments. After the refund, you get your gold jewelry back. Nationalized banks, private banks, and other financial institutions offer these loans at affordable interest rates. Borrowers typically use this loan to achieve a sudden financial goal, such as a marriage or the education of a child. Instead of selling gold, many people prefer to opt for taking Gold loan.
Loan against Insurance policy: Anyone with an insurance policy can apply for a loan from the insurance company. The loan amount depends on the type and period of the policy. Generally it is up to 80 percent of the salvage value of the policy. The interest rate on the insurance loan is much lower and varies company to company. Tenure (over the term of the policy) and repayment options are decided by the insurance company according to its policies. The unpaid loan amount / interest amount adjusts to the policy amount before any payments against the policy are made.
Loan against PPF: Loan against PPF (Public Provident Fund) is one of the easiest and most beneficial loan options in India. The loan is easily disbursed. The loan against PPF is generally a small amount depending on the money in the PPF account. The interest rate is 2% more than the interest rate given for the PPF at the time the loan is taken. The loan is available from the 2nd year of account opening ie., after completing one year of account opening. The loan can be used within five years after opening the account. If five financial years have passed since the account was opened, the account holder cannot apply for the loan. The loan must be repaid in the next 3 years from the date of the loan.