There are various types of loans present in India. However, most people choose personal loan rather than other types in spite of having a variety of assets, which they can mortgage to avail loans at a lower interest rate. One of the reasons behind this is the lack of knowledge about different types of loans available in India.

 

A loan is a specific quantity of cash that you just will borrow from the lender (usually banks) with associate degree assurance of returning it back at intervals the in agreement amount. The lender on differing kinds of loans levies a specific 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?

 

Contrasting to the general rumour, applying for a loan is not a complicated process. You should be particularly careful about the fact that you provide all the genuine documents to banks. Different types of loans require a different set of documents in India.

 

Steps for Applying For Loan

 

1. Loan Application Form: You have to fill up the application form for the type of loan you need from the bank. You must be sure that all the information written on the form is genuine and correct.

 

2. CIBIL Score Check: The bank then checks up your CIBIL (Credit Information Bureau India Limited) to count the score of your credit cards. CIBIL absorbs and maintains the records about the amount/loans you need to repay apart from the current loan you are going to apply. Your loan application is easily approved if you have a high credit score.

 

3. Submitting the Necessary Documents: The borrower needs to submit a series of documents to supplement their loan application form. Documents such as proof of identity, income proof, and other certificates are required to be submitted with the application form.

 

4. Loan Approval: Once you submit the application form along with all the necessary documents, the bank verifies all the details you have provided. When the verification is complete and the results are satisfactory the bank approves your loan application.

 

 

Types of Loan in India

Different Types of Loans in India:

Let’s check out some of the common types of loan available in India:

 

1. Personal Loan:

 

Personal loans are given to meet the personal requirements of the borrower. You can use the money from this type of loan in any way you want to. You can pay off your previous debts, purchase some expensive accessories for yourself, and plan a great trip with your family. It’s up to you how to use the money. The interest rates for this type of loan are higher compared to the other types of loans.

 

2. Home Loan:

 

Everyone dreams of owning their own house. But, buying a house needs a lot of money and it is not always possible to have that much money at once. Now Banks offer home loans that can assist you in purchasing a property. A home loan could be of different kinds such as:

 

Loan for constructing a house

 

Loan for remodelling and repairing your existing home

 

Loan for purchasing a land

 

3. Education Loan:

 

Banks also offer education loans to the students who need it. These loans offer better support in terms of study opportunities to students who are financially weak. Students who are searching for higher education can take education loan from any bank in India. Once they get a job, they need to repay the money from their payment.

 

4. Gold Loan:

 

Out of all the types of loans available in India, the fastest and easiest one to get is the gold loan. The gold loan was very popular back in the days when the rates of gold were rising exponentially. Gold companies may face losses due to falling rates of gold at any times.

 

5. Vehicle Loan:

 

Vehicle loans are there to fulfil your dream of owning a car or bike. Usually, all banks provide this type of loan. It is a secured loan means if the borrower doesn’t pay the instalments in time; the bank has the right to take back the vehicle.

 

6. Agricultural Loan:

 

There are many loan schemes by banks to assist farmers and their needs. This type of loans have very low-interest rates and help farmers to afford seeds, equipment for farming, tractors, insecticides etc. to produce a better yield. Return of the loan can be done after the yielding and selling of crops.

 

7. Overdraft:

 

Overdraft is a procedure of requesting loans from banks. This details that the customers can take more money than they have put in their accounts.

 

8. Loan against Insurance Policies:

 

You can apply for a loan against it if you have an insurance policy. Only those insurance policies that are aged over three (3) years are eligible for such loans. The insurer can themselves provide a loan amount against your insurance policy. Approaching the bank for the same is depends on you. You have to submit all the documents related to the insurance policy to the bank.

 

9. Cash Credit:

 

Cash credit is a procedure of bank for paying a customer in advance. This type permits the customer to borrow a certain amount from the bank. The customer needs to provide a few securities to the bank against cash credit. The customer can renew this process every year.

 

10. Loan against Bank FDs:

 

If you have a fixed deposit in with a bank, you can apply for a loan against that. If the FD is near or more INR 1 lakh, you may apply for a loan of INR eighty thousand. The interest rate levied on such loan is comparatively higher than that paid by the bank on your Fixed Deposit.

 

11. Loan against Mutual Funds or Shares:

 

Normally, individuals provide their investment company investment or shares as collateral for his or her application. The banks provide out loans of a quantity lesser than the full valuation of the shares or investment company investment. The quantity is lesser as a result of the bank will then charge the rate of interest if the borrower is unable to repay the quantity.