India's loan types: Understanding the key ones
What's the story
Navigating the world of loans can be tricky, especially in a diverse economy like India. With a plethora of options available, knowing which loan suits your needs best is important. This guide aims to demystify five key loan types in India, giving you insights into their features and benefits. Whether you're looking for personal finance or planning a business venture, knowing these loans can help you make informed decisions.
#1
Personal loans: A quick financial fix
Personal loans are unsecured loans that can be used for anything, from medical emergencies to travel expenses. Since they don't require collateral, they are easy to avail of but usually come with higher interest rates than other loan types. The loan amount typically ranges from ₹50,000 to ₹20 lakhs, and the repayment period is between one to five years.
#2
Home loans: Investing in property
Home loans are meant for buying or constructing residential properties. They are secured against the property being purchased and generally offer lower interest rates than personal loans. The amount can range from ₹1 lakh to ₹10 crores, depending on the property's value, and repayment periods can go up to 30 years.
#3
Education loans: Funding your studies
Education loans help students pay for higher studies in India and abroad. These loans cover tuition fees, accommodation costs, and other related expenses. They usually require a co-signer and are available for amounts ranging from ₹10,000 to ₹50 lakhs. Repayment starts after course completion, with tenures of up to 15 years.
#4
Business loans: Fueling entrepreneurial growth
Business loans provide financial support for small enterprises or startups looking to expand operations or manage cash flow challenges. These are either secured against assets or unsecured, based on the lender's assessment of the business's potential. Loan amounts vary widely based on requirements but typically range from ₹1 lakh to ₹5 crores, with repayment periods of one to five years.
#5
Auto loans: Driving your dreams
Auto loans make it easier for individuals to buy vehicles without paying the entire cost upfront. The vehicle itself serves as collateral, which is why these loans come with lower interest rates compared to unsecured ones like personal loans. The amount borrowed usually ranges from ₹1 lakh to ₹1 crore, with tenures between three months and seven years.