In a diverse country like India, the financial needs and desires of each person are different. Each of them has various goals and desires. Whether, it’s owning a home, pursuing higher education or even driving a new shiny car, a loan can assist you in fulfilling it. There are different types of loans available in India, each of them tailored to your specific goals.
The following are the most common types of loans that are available in India:
- Home loan
- Education loan
- Vehicle loan
- Personal loan
- Gold loan
1) Home loan:
A home is a dream of every middle-class family. A home loan helps in turning this dream into a reality. It is one of the most common types of loans in India.
Key Features of Home loan are:
- Long repayment tenure: Home loans generally offer a longer repayment tenure ranging from 15 years to 30 years.
- Tax benefits: The main advantage of having a home loan in India is the tax benefits it offers. You can avail of tax benefits on both interest and principal amounts.
- Secured loan: In a home loan, the purchased property or the house itself serves as collateral.
- Competitive interest rate: In India, the average interest rate for a home loan ranges from 7.5% to 10%.
2) Education loan:
An education loan is the best loan for people who are not able to do their higher education because of financial constraints. A good quality education is an important investment for one’s future. But the cost of pursuing higher education can’t be easy for everyone. This is where an education loan helps you.
Key Features of Education loan are:
- Moratorium or a grace period: This feature allows the student to complete the education before they begin repaying the loan.
- Tax benefits: Under Section 80E of the Income Tax Act, interest paid on education loans is eligible for tax deductions.
- Interest rates: Most of the education loans have lower interest rates than other unsecured personal loans. However, the interest rates for each bank are different.
- Collateral and collateral-free loans: Some education loans require property or fixed deposits as collateral.
3) Vehicle loan:
In a developing country like India, owning a vehicle has become a necessity for many. Whether it’s a two-wheeler for your daily transport or a vehicle for your business utility, a vehicle loan can provide the required financial support.
Key Features of Vehicle loan are:
- Down payment: The borrower needs to pay a percentage of the total amount of the vehicle through a down payment.
- Quick processing: Lenders often process vehicle loans quickly.
- Secured loan: In a vehicle loan, the vehicle purchased serves as collateral.
- Interest rates: The interest rate for a vehicle loan depends on the type of vehicle and loan amount. It varies from bank to bank.
4) Personal Loan:
A personal loan is used to cover the personal financial needs of an individual. These loans provide unsecured funding on the basis of the person’s creditworthiness and income.
Key Features of Personal loan are:
- Unsecured Loan: Personal loans do not require any collateral. These loans are on the basis of the borrower’s creditworthiness, income, and ability to repay the loan.
- Fixed interest: The interest rates of most of the personal loans remain constant throughout the loan term.
- Quick Processing: Personal loans are often processed quickly.
- Fixed Repayment tenure: Personal loans have a fixed repayment tenure ranging from month to year depending on the loan amount.
5)Gold loan:
Gold loans are secured loans that use the gold assets of the borrower as collateral and provide quick funds. These loans are best suited in times of urgent financial needs.
Key Features of Gold loan are:
- Secured Loan: These loans use their gold assets, such as jewellery, coins, or ornaments.
- Minimal paperwork and quick processing: Gold loans have minimal paperwork and are processed quickly. This feature makes it best suited for urgent financial requirements.
- Interest rates: The interest rate in gold loans ranges from 7% to 11%.
- No credit check: As gold loans use collateral, generally lenders don’t check about the borrower’s credit history.
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