Just like you know the latest happenings through social media platforms, getting information about various loans offered by financial institutions can help you deal with any financial need.
A loan is a convenient and swift way to get a particular sum of money to manage your expenses. As long as you can guarantee that you will be able to repay the borrowed amount, it is easy to avail of a loan.
Access to funds has become easier with accessible loan applications and disbursals through online platforms. While the application and disbursal have become seamless, the borrower’s knowledge is not so much. There is still a lot of scope for people borrowing to understand the kind of loans that exist and the unique features attached to each. Before approaching your home, auto, or Personal Loan contact, it is advisable to know what you may be getting into.
Let us begin by understanding the various types of loans that exist. Loans can be classified based on Secured and Unsecured Loans.
Secured Loan
A secured loan is a type of loan where one needs to provide some collateral before borrowing. This means that the person who is borrowing will need to pledge some asset of their as a security in case they cannot fulfill the financial commitments. Until the borrower can entirely repay the loan, the lender will keep the property documents/ asset ownership documents or title deeds. Lenders even offer loans against securities and loans against fixed deposits which means that such assets can also be kept as mortgages.
Secured loans are more prevalent in cases where the borrowed sum is very high or the borrower’s credit score is very low. Lenders cannot take such a huge risk when the amount is so high or the borrower is not credible enough. The advantages of secured loans are lengthier repayment periods and lower interest rates.
Unsecured or Collateral-Free Loans
If you have ever reached out to your Personal Loan provider, you would have encountered the term unsecured or collateral-free loans. An unsecured personal loan allows the borrower to borrow without pledging any assets as security. Since most Personal Loans are unsecured, a Loan provider will comprehensively assess the applicant’s background check, past repayment history, credit score, ongoing loans, and income. All these indicators point toward the borrower’s ability to repay the loans. Credit card purchases and Personal Loans are mainly unsecured loans. The standard features of these loans are shorter repayment periods of up to five years, lower lending amounts of up to Rs. 25-30 lakhs and higher interest rates.
While there are loans for almost every financial need, a Personal Loan is something you can use for any purpose without being questioned.
Let us see the different kinds of loans:
Personal Loan
A Personal Loan is one of the most hassle-free and straightforward ways to get a loan to meet a liquidity issue. Personal Loan providers are not concerned with how the money is used, which means the end user is unrestricted. One can use a Personal Loan to fund anything from a medical emergency to buying big-ticket items like gadgets and furniture. It can be used to clear a credit card debt, go for a vacation, renovate the house, or send money to a child studying abroad. The Personal Loan contact comes through any time there is a financial crunch. A lender can offer a pre-approved Personal Loan to a customer with a financial relationship. Even if there is no past relationship, one can apply for a Personal Loan from several new-age lenders online. Just three clicks online, and the loan comes through. Although one needs to have a good credit score and a monthly income of at least Rs 25,000 to meet the eligibility criteria of the Personal Loan provider.
Education Loan
As the name suggests, education Loans are financial instruments that help borrowers fund their education or a family member’s education. This can be to pursue higher studies abroad for any diploma, undergraduate degree, certification, or postgraduate degree from a renowned educational institution or university. The offer letter from the institution is compulsory to get the loan. Not only does this amount cover the loan for the course but also additional expenses like living and purchasing the course material.
Auto or Vehicle Loan
Vehicle Loans help you buy a two-wheeler and a four-wheeler vehicle based on your need. The lender determines the loan amount based on the vehicle’s on-road price. This loan rarely gets rejected as the car is collateral for the lender. The lender will give a percentage of the vehicle as a loan, meaning the down payment needs to be arranged. The lender owns the vehicle until the loan has been fully repaid.
Home Loan
Home Loans are offered to buy property, land, furnished or unfurnished homes, and apartments. This loan can also be used to construct, renovate and repair an existing house. Like an auto loan, the property will be held by the lender. Upon completion of repayments, the lender will transfer the home ownership. The Home Loan tenure is much longer than a Personal Loan as the amount involved is significantly higher. The interest rates are also relatively lower and start at 6.75%. One can repay this loan for up to 30 years.
Business loan
A business loan provides business owners with liquidity to realize their vision. It could be used for investing in new assets, such as plants and machinery, managing day-to-day expenses (working capital), expanding geographically, venturing into a new product line, spending on research and development, hiring better human resources, etc. Depending on how one wants to use it, various business loans are available in the market. Lenders evaluate certain fundamentals of the business, like years of operation, ITR for the past three years, owners’ credentials, financial statements, and more, to assess the repayment capacity of the business to repay the loan.
Loan against a pledge
Gold loans and loans against assets are perfect examples of loans offered when the borrower’s asset is pledged. Based on the value of what is being pledged, the lender keeps a margin and offers money to the asset owner. One can pledge gold, fixed deposits, stocks, securities, bonds, mutual funds, etc., and take a loan against them.
So, now that you know the different types of loans available, you can assess your need and go for the most suitable loan for your need. If you have any complications in getting a loan from traditional lenders, you can always connect to new-age lenders like Clix Capital advised you to check the personal loan document first before applying for the loan. We offer you a loan with minimum documentation and an Experian credit score of 630.
