Are you planning to buy a house, start a business, or fund your child’s education? No matter your goal, there’s likely a loan designed just for it. Understanding the different types of loans in India is the first step to making a smart financial decision.
From personal loans to home loans, and education to business financing, India offers a wide range of lending options tailored to various needs. In this blog, we’ll walk you through the major loan types available in the country, their features, eligibility criteria, and how to choose the one that best suits your financial 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
- Business Loan
- Loan Against Property (LAP)
- Agriculture Loan
- Credit Card Loan
- Consumer Durable Loan
1) Home loan:
If you’re planning to build a home, there are plenty of home loan options available today. 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:
A host of education loan schemes are available in India for aspiring learners.. 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. As of now, we have lots of personal loan types in India. 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.
6. Business Loan
Business loan is one of the most important categories of loans in India and particularly among the entrepreneurs and SMEs. The loans are required to start a new business or to enlarge an already existing one. In India, both secured and unsecured loans are available to the lenders based on the scale and type of business.
A business loan may be spent on buying inventory, investing in equipment, employing staff or working capital requirements. There are many types of business loans which can be availed by both the public and the private banks and also by the NBFCs depending on the type of business. The government initiatives such as MUDRA and CGTMSE also assist this segment by providing business loans at a low rate of interest to micro and small enterprises with no collaterals.
Key Features:
- Eligibility: Startups, SMEs and self-employed professionals who have at least 1-3 years of business operation.
- Loan Amount: 50k to 5 Crore (depends on lender and business profile).
- Interest Rate: 10-22 percent a year, depending on creditworthiness.
- Loan Tenure: 1 to 7 years repayment flexibility.
- Collateral: Secured and non-secured loans in India are offered under this category.
7. Loan Against Property (LAP)
Loan Against Property or LAP is a secured loan which enables you to avail a loan by providing your residential or commercial property as security. It is commonly taken between the types of loans in India because its rates are low as compared to the unsecured loans. This kind of loan suits when one has a huge financial requirement like expanding business, medical emergency or tertiary school fees.
The lenders give longer repayment periods and flexible EMIs as the loan is secured by the tangible asset. Being not included in the types of personal loans in India, LAP is frequently utilized by people who require a considerable amount of corpus and easy repayment conditions.
Key Features:
- Eligibility: Salaried and self-employed people who own residential or business premises.
- Loan Amount: 70 percent of the market value of the property, average between 5 lakh to 10 crores.
- Interest Rate: Begins at 8.5 to 11.5 percent per annum (depending on credit profile).
- Loan Term: On a long term basis up to 15 years.
- Collateral: Obligatory; until the repayment is full, the property is mortgaged.
8. Agriculture Loan
India is an agrarian economy, therefore, agriculture loans play a crucial role among the category of loans in India. They are special loans advanced to farmers and agribusinesses to facilitate cultivation, irrigation systems, acquisition of farm equipment, livestock or even establishment of cold storage facilities.
Different government schemes such as Kisan Credit Card (KCC) enable farmers to get credit at subsidized rates of interest. These loans are generally secured loans, which are based on land holding or other assets of the borrower. They play a very important role in enhancing productivity in the agricultural sector and the availability of inputs in a timely manner.
Key Features:
- Eligibility: Individual farmers, self-help groups, agribusiness firms and cooperatives.
- Loan Amount: 10,000 to 20 lakh (depends on purpose and pledged asset).
- Interest Rate: Subsidized rates starting from 4% to 7% under government schemes like KCC.
- Loan Tenure: Short- and long-term options; ranges from 6 months to 7 years.
- Collateral: Land, tractor, or other movable/immovable agricultural assets (based on loan amount).
9. Credit Card Loan
Credit card loans are becoming one of the popular options of flexible personal loans in India because they require no documentation and prompt approval. These are loans that have already been given to you in advance depending on how much you have not used your card. Although they are categorized as unsecured loans in India, they can be used in short term requirements such as emergencies, travel or even large ticket purchases.
The catch? In most cases, they are loans with higher interest rates than conventional loans. Yet, they can be very helpful when you require fast cash without taking time in getting them approved. There are also banks who can convert your card expenses into EMIs so that you have a greater control over repayments.
Key Features:
- Eligibility: Good repayment history and frequent usage of pre-approved credit cards.
- Loan Amount: Depending on the available unused credit limit; it is between 10,000-5 lakh.
- Interest Rate: 12 to 24 percent per annum normally; it can be subject to offers by the lenders.
- Loan Tenure: 6 to 60 months; options in EMI are usually flexible.
- Collateral: Unsecured loan- no collateral is required.
10. Consumer Durable Loan
A consumer durable loan enables you to buy daily household appliances and electronic gadgets such as TV, refrigerator, washing machine, laptop, etc. without the need to pay the whole amount at once. Banks, NBFCs and even retailers offer these loans, usually with EMI options of zero cost.
This is a very convenient type of loan especially to the salaried people or families who want to equip their homes without putting their savings under a strain. It is not as widely spoken about as the home loan options in India, but still has a part in enhancing lifestyle and quality of life. They are typically unsecured short-term loans with few documents.
Key Features:
- Eligibility: Salaried or self-employed people with a steady source of income.
- Loan Amount: 5000-5lakh as per the product costs.
- Loan Amount: ₹5,000 to ₹5 lakh, depending on the cost of the product.
- Interest Rate: 0% to 15% (many offers include no-cost EMI during festival seasons).
- Loan Tenure: 3 to 24 months; short-term repayment cycles.
- Collateral: Not required; unsecured and based on the borrower’s credit profile.
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