What are the Types of LoansPeople commonly take personal loans to support household purchases, education, travel, debt consolidation, and medical urgency. Besides personal loans, there are multi-purpose commercial loans also available for the smooth functioning of the business. The working capital loan is one type of commercial loan that proves to be useful in the daily functioning of a business. Loans are either secured or unsecured, depending on the lender. Secured loans are backed by collateral, which clearly states that the lender can seize the borrower's asset if the instalment is not paid on time during or end of the tenure.
All loans do not provide equal benefits. If you are planning to apply for a loan any sooner, decide which type of loan is right for your situation. Let us see the different types of loan and their advantages:
- Unsecured Personal Loan: Personal loans suffice a variety of needs, right from managing wedding expenses to consolidating debt. These are mostly unsecured loans and can be acquired instantly within 24 to 48 hours. The rate of interest charged will be low if you hold a good credit score.
- Secured Personal Loan: These types of personal loans demand collateral that is a certificate, a property, or an asset like a car can be a security against the obtained loan. This loan holds a risk of losing an asset, in case you are unable to make loan payments.
- Home Equity Loan: A type of secured loan where your home forms the base to borrow money in bulk. The loan amount given on home equity loans depends upon the market value of your property. You can use this equity loan for major home repairs, renovations, or to pay off the medical bills.
- Gold Loan: Since old times, gold is considered to be an asset that is of use in times of financial crisis. A gold loan is offered against a piece of gold jewellery or coins as collateral. The sanctioned loan amount is calculated based on the value of gold. Gold loans can fulfil short-term needs.
- Loan Against Fixed Deposits: Get a loan amount of nearly 70% to 80% of your fixed deposit value. The repayment time is less, not extending more than the FD’s tenure.
- Short-term Business Loan: A short-term business loan is ideal to meet daily expenditure. It is available in the form of:
- Working capital loans
- Machinery loans
- Trader loans
- Manufacturer loans
- Women entrepreneur loans
- Vehicle Loan: This is available for either two-wheeler or four-wheeler vehicles. Fulfil your dream of owning your favourite bike/car through vehicle loans. These loans are also applicable to acquire second-hand vehicles.
Hence, as the financial needs are varied, so are the types of loans. Over the years, lenders have become flexible with loan policies, interest rates, and tenure, which makes it possible for a common man to acquire loans so easily. Plus, with technology in hand, applying for a loan is not a task anymore. Right from the loan application, EMI calculation, verification, sanction, disbursal, and repayment, everything is processed online.
The availability of different types of loans has made life simpler and stress-free to an extent. It is entirely up to the borrower to be sure of loan repayment for sustaining financial stability and credit score.