Understanding different types of loans in India: A guide
What's the story
Navigating the world of loans can be daunting, especially in a diverse financial landscape like India. With various loan types catering to different needs, understanding them is crucial for making informed decisions. Here's a guide to help you understand the different types of loans available in India, their purposes, and how they can benefit or impact you financially.
#1
Personal loans: A versatile option
Personal loans are unsecured loans that can be used for any purpose, be it medical emergencies or travel expenses. They usually come with higher interest rates as they don't require collateral. The loan amount can range from ₹50,000 to ₹20 lakhs, depending on the lender and borrower's creditworthiness. The repayment period is usually between one to five years.
#2
Home loans: Investing in property
Home loans are designed for purchasing or constructing residential properties. They are secured against the property being bought and offer lower interest rates compared to other loans. The loan amount can go up to 90% of the property's value, with repayment periods extending up to 30 years. Borrowers must also pay processing fees and insurance premiums.
#3
Education loans: Funding your studies
Education loans help students pay for higher education in India or abroad. These loans cover tuition fees, accommodation costs, and other related expenses. They are usually available up to ₹20 lakhs for domestic courses and ₹50 lakhs for overseas studies. Repayment starts after course completion and can last up to 15 years.
#4
Car loans: Financing your vehicle
Car loans are meant for financing the purchase of new or used vehicles. They are secured against the car itself, which lowers interest rates compared to unsecured loans like personal ones. The loan amount usually covers up to 90% of the car's value, with repayment terms ranging from three to seven years.
#5
Business loans: Supporting entrepreneurship
Business loans provide financial support to entrepreneurs looking to expand their ventures or start new ones without diluting ownership stakes by giving away equity shares in exchange for funding investments made into operations instead thereof (e.g., equipment purchases). These funds may also be used towards working capital requirements such as inventory management systems upgrades, etcetera, depending upon specific needs identified during initial consultations between parties involved therein (i.e., lenders and borrowers alike).