In India, there are many different forms of loans. Despite having a range of assets that they might mortgage to obtain loans at a cheaper interest rate, most people select a personal loan over other sorts. One of the reasons behind this situation is a lack of understanding of the many sorts of loans available in India.
A loan, by definition, is a set sum of money that you can borrow from a lender (typically a bank) with the promise of repaying it within the agreed-upon time frame. On many sorts of loans, the lender charges a set rate of interest.
The borrower repays the borrowed amount along with the interest in instalments as per the agreement between the two parties.
HOW TO APPLY FOR A LOAN
Application for a Loan : You must complete the appropriate application form for the sort of loan you require from the bank. You must ensure that all of the information on the form is true and accurate.
CIBIL Score Check : The bank then runs your CIBIL report to determine your credit card score. Apart from the present loan you are seeking to apply for, CIBIL keeps track of and retains data about the money/loans you need to return. Your loan application will be accepted quickly if you have a good credit score.
Providing the Required Papers: To complement their loan application form, the borrower must provide a number of documents. Along with the application form, you must submit documents such as proof of identity, proof of income, and other credentials.
Loan Approval: The bank validates all of the information you’ve provided once you’ve submitted the application form and all of the required papers. The bank approves your loan application once the verification is completed and the results are favourable.
DIFFERENCE TYPES OF LOANS
- PERSONAL LOAN
Personal loans are given to fulfil the borrower’s personal needs. You can put the money from this type of loan to whatever purpose you want. You can pay off your previous obligations, treat yourself to some high-end accessories, and plan a fantastic family vacation. It is entirely up to you to decide how to spend the funds. When compared to other sorts of loans, the interest rates on this type of loan are greater.
- HOUSING LOAN
Everybody dreams of owning their own house. However, buying a house needs a lot of money and it is not always possible to have that much money at once. Banks now offer home loans that can assist you in purchasing a property. A home loan can be of different types such as:
- Loan for constructing a house
- Loan for repairing and remodelling your existing home
- Loan for purchasing a land
- EDUCATION LOAN
Banks also provide education loans to those who require them. Students who are financially disadvantaged benefit from these loans since they provide better support in terms of educational opportunities. Students who want to pursue higher education can get a loan from any Indian bank. They must reimburse the money from their payment once they have found work.
- GOLD LOAN
The gold loan is the quickest and easiest to obtain of all the sorts of loans offered in India. When gold prices were rising at an exponential rate, this form of borrowing was quite popular. The current decline in gold prices has resulted in losses for gold companies.
- VEHICLE LOAN
Vehicle loans help you fulfil your dream of owning a car or bike. Almost all banks provide this type of loan. It a secured loan means if the borrower doesn’t pay the instalments in time, the bank has the right to take back the vehicle.
- AGRICULTURE LOAN
Banks offer a variety of loan programmes to help farmers with their needs. These loans have relatively low interest rates and enable farmers acquire seeds, farming equipment, tractors, insecticides, and other things they need to increase their produce. The loan can be repaid once the crops have been harvested and sold.
Overdraft is a method of borrowing money from a bank. It means that clients can withdraw more money from their accounts than they have put.
- LOAN AGAINST INSURANCE POLICIES
You can get a loan against your insurance policy if you have one. These loans are only available to insurance policies that have been in force for at least three years. Your insurer may be able to provide you with a loan based on your insurance coverage. It is not necessary to go to the bank for the same. To the bank, you must present all documentation relating to the insurance coverage.
- CASH CREDIT
A bank technique for paying a customer in advance is known as cash credit. This procedure allows the customer to obtain a loan from the bank for a specific amount. In exchange for monetary credit, the customer gives the bank a few securities. This process can be renewed once a year by the consumer.
- LOAN AGAINST FDs
You can get a loan against your fixed deposit if you have one with a bank. You can apply for a loan of INR 80,000 if your FD is worth around or more than INR 100,000. The interest rate on such a loan is higher than the interest rate paid by the bank on your FD.
- LOAN AGAINST FUNDS OR SHARES
In most cases, customers use their mutual fund investment or stock as collateral to secure a loan. Banks provide loans that are less than the whole value of the shares or mutual fund investment. Because the bank can charge interest if the borrower is unable to repay the loan, the amount is lower.