Different Types of Loans Available in Banks

Types of Loans:- In today’s economy, the banking system plays a critical role. The reason for this is that banks serve as a link between individuals who have excess cash and those who are low on cash for any reason.

Some people wish to invest, so they retain their cash in the account in the form of FDs, RDs, and even savings accounts, while others who are in financial trouble turn to the bank for loans. Some people borrow for business purposes, while others borrow for personal reasons. 

What does the term LOAN mean?

A loan is a type of debt that an individual or other entity takes on. The borrower receives a sum of money from the lender, which is frequently a corporate, financial organization, or government. In exchange, the borrower agrees to a set of terms, which may include finance charges, interest, a repayment schedule, and other stipulations. The lender may need collateral to secure the loan and assure repayment in particular instances. Bonds and certificates of deposit can also be used as collateral for loans (CDs)

Secured Types of Loans

This kind of loan requires collateral or some kind of security to be kept with the lender. You may keep assets like cash or saving account certificates. Also, physical assets may be kept in the form of car or house papers. If you default the loan lender can take on these assets officially to recover the debt. Financial institutions make loans without collateral based on a number of factors, including the borrower’s credit score, repayment history, and other factors. Lenders can utilize these loans to fund a wide range of activities and cover unforeseen needs without breaking the bank. These loans, however, have a higher interest rate than ordinary loans.

Home loans

Everyone isn’t capable of buying a house on own capacity. Our banking system has come up with a facility which is known as “housing loans”. A home loan is opted for buying a new flat/plot of land. It can also be taken to renovate the existing house or even repair the existing house. 

  • Home Loan – It is the most basic type and many banks, finance company offers us this facility. The lender will legally keep the house until complete repayment is done.
  • Home Construction Loan – It may be taken when you already own a plot of land fit for construction purposes
  • Home Extension Loan – As the name depicts when you already own a house but want to extend it by adding a floor or such.
  • Home Improvement Loan– It consists of repairing and renovating the exciting house not rebuilding a new one. It includes painting, electrical circuit repairing, plumbing, etc.  
  • Home Loan Balance Transfer – This feature enables us to transfer the loan balance that is yet to be procured to a different lender that offers it at a lower interest rate or better service.

Personal Loan

Personal loans are generally available from all institutions. Personal loans provide the advantage of allowing you to spend your money as you want. This personal loan can be used to fund a vacation or the ownership of a new smartphone.

Emergency expenses – surprise medical bills are another reason to take personal loans. Even common medical expenses might cause us huge amounts of money which might not be readily available. Even veterinary expenses are covered through these loans.

Vehicle financing expense and appliance purchasing The automobile industry is still a luxury for many. There might be cases where you might be able to afford a car but only on EMI payments in such cases, these loans help us a lot. Also, little electronic gadgets which have become today’s need such as mobile phones, washing machines, dishwasher and many more.

Wedding purpose According to Indian society marrying is a compulsory ritual and everyone dreams of getting married royally. These personal loans make this true by providing you with loans at low-interest rates.

Credit Card Loan

This is for people who need money right away. This form of loan can be obtained from your credit card company or any financial institution. This is a simple credit with extremely high-interest rates. An automobile loan is a sum of money borrowed by a customer from a bank or other financial organization in order to achieve his or her desire of owning a car. In exchange, you agree to repay the agreed loan amount plus interest at a certain rate. The bank makes a total payment to the vehicle dealer, and you, as a customer, continue to pay the bank over time, plus interest and any relevant fees.

Education loan

Education Loans are a type of financial aid available to students to help them cover the costs of their studies. Education loans are given in cash and must be repaid to the lender along with a rate of interest. They can be obtained through funding, scholarships, financing, and prizes. Students who want to take out education loans should do so based on their needs, as the repayment durations for these loans can vary greatly depending on the lender and the amount borrowed.

Education loans are unsecured loans that can be used to pay for educational expenses such as tuition, books, living expenses, and other charges such as transportation. If you want to get an education loan but are jobless or still in school, you may need a co-signer, such as a friend, parent, or family who is an authorized adult. Once the student finishes his or her studies, the loan can be repaid.

Unsecured Types of Loans

It requires no collateral or security to be kept while taking loans. This may be considered riskier as there is no means to recover the loan. But still, these types of loans are offered but with a backdrop of charging higher interest rates which might help them to cover their margin. Financial institutions provide loans without collateral depending on a variety of factors such as the borrower’s credit score, repayment history, and other considerations. Lenders can use these loans to fund a variety of activities as well as deal with unexpected expenses without breaking the bank. However, as compared to other loans, these loans have a higher interest rate.