There are several types of bank loans available in India. However, most borrowers prefer personal loans over certain types, while possessing a range of savings that can be used to repay loans at a lower interest rate. One of the factors behind this situation is the lack of knowledge of the different types of bank loans available in India.
By term, a loan is the amount of money you will borrow from a lender (usually a bank) with the guarantee that it will be repaid during the agreed period. The lender levies a defined interest rate on various types of loans. The creditor should repay the sum borrowed along with the interest in installments as provided for in the agreement between the two parties.
How To Apply For A Loan?
In addition to the common belief that applying for a loan is not a difficult process. You will be especially cautious that you send all the actual documents to the banks. In India, different types of bank loans need a specific collection of documents.
Steps For Applying For Loan
Loan Application Form: You need to fill in the application form for the kind of loan you need from the bank. You need to be sure that all the information in the form is accurate and correct.
CIBIL Score Check: The bank then scans the CIBIL to count the credit card score. CIBIL tracks and maintains lists of the money/loans that you plan to repay rather than the new loan that you are seeking to qualify for. If you have a good credit score, your application for a loan is immediately approved.
Submitting the Necessary Documents: The borrower has to produce a set of documents to fulfill the repayment process of the loan. Documents such as proof of identification, proof of income, and other documents must be sent along with the application form.
Loan Approval: Once you have submitted the application form along with all the required documentation, the bank can check all the information you have provided. When the verification is complete and the findings are acceptable, the bank accepts the application for a loan.
Let’s look at some of the common types of loan available in India:
Personal loans shall be issued to satisfy the personal needs of the borrower. You may use this form of loan money in whatever manner you see fit. You should pay off your previous loans, purchase some expensive items for yourself, and schedule a great trip for your family. It’s up to you to use your income. The interest rates for this type of loan are higher than for other types of loans.
A personal loan is a type of unsecured loan which financial companies offer. They are considered to be unsecured and do not carry the security documents. These loans are made purely on the basis of their credit score and ability to repay the loan from their current personal income.
You can obtain a personal loan for your personal requirements such as home renovation, wedding, medial treatment, vacation travel. A personal loan will be given to salaried peoples. Normally, personal loans processed very fast and require less documentation.
We all dream of having their own home. But buying a house takes a lot of investment, and it’s not always easy to get so much equity at once. Banks are also offering home loans that will help you purchase the property. Home loans may be of various forms, such as:
- Loan for constructing a house
- Loan for repairing and remodeling your existing home
- Loan for purchasing a land
The process of applying for a home loan is simple and easy. You just need to apply online, fill out the application form, and submit it. After that, you will get your approval letter from the bank. The banks will then send you an email with details about the loan amount, interest rate, and terms. After that, they will send you a confirmation email which includes all the required documents like the name of lender and date of payment.
Once you have applied for a home loan, the bank will check your credit score and make sure that you are eligible for the loan. If you do not qualify, they will ask you to pay back a lump sum of money. This is called as EMI’s and it is calculated by taking out a loan from your bank account. The EMI is calculated by dividing the total amount of money you owe on the loan by the amount of money you need to repay and the loan period. The interest rate depends on the amount of money you borrow.
Banks also provide educational loans to those who require it. Such loans provide more assistance in terms of study options for students that are financially weak. Students seeking to follow higher education will lend from any bank in India. When a job is secured, they need to repay the money from their payment.
A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in the fact that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school. See also our recommendation on the complete guide to student loan
Of all the types of loans available in India, the quickest and simplest to get is the gold loan. This form of loan was very common back in the days when gold rates were increasing exponentially. Gold producers have been suffering declines owing to declining prices of gold in recent times. Complete guide to gold loan in India.
Vehicle loans help you fulfill your dream of owning a car or a bike. Almost all banks are offering this type of loan. A revolving loan ensures that if the creditor does not settle the installments on full, the bank has the option to take the vehicle back. See also Everything you need to know about car loan
Multiple loan schemes are in operation by banks to support farmers and their needs. Such loans have relatively low-interest rates and help farmers buy seeds, farm equipment, tractors, insecticides, etc. to achieve higher yields. The repayment of the loan may be made after the production and selling of the crops.
Loan Against Insurance Policies:
When you have an insurance policy, you will qualify for a loan against the account. Only insurance plans above 3 years of age are eligible for these loans. The company will give a credit balance of the insurance scheme on its own. Approaching the bank to the same is possible. You ought to send all the insurance contract papers to the government.
Cash credit is a bank procedure for paying the client in advance. This method helps the consumer to borrow a certain amount from the bank. The client must provide the bank with a few securities in return for cash credit. This process may be repeated every year by the customer.
Business loans are also known as commercial loans that can be used to finance an existing company development or to set up a startup. Business loans come with a collection of terms and conditions and interest rates that will be repaid during the lending period.
There are different types of business loans, including bank loans, asset-based financing, invoice financing, microloans, business cash advances, and cash flow loans.
A business loan may be available with or without insurance, it depends on the bank providing the loan for the business and also on the level of risk people are prepared to take. Business loans for an established company or a whole new one to launch, there are several banks in India providing loans for business including both for small and large businesses.
Loan Against Bank FDs:
When you have a fixed deposit with a bank, you may qualify for a loan against the balance. If the FD is below or higher than INR 100,000, you will apply for a loan of INR 80,000. The interest rate charged on this loan is relatively higher than the interest imposed on the FD by the bank.
Loan Against Insurance Policies:
If you have an insurance policy, you will apply for a loan against the consideration. Only insurance plans above 3 years of age are eligible for these loans. The company will give a credit balance of the insurance scheme on its own. Approaching the bank to the same is possible. You ought to send all the insurance contract papers to the bank.
If you want to borrow money – whether to pay debts or purchase a luxury item – make sure you completely understand the agreement. Know what type of loan you’re getting and whether it’s attached to any of your properties.
Also, get familiar with the repayment terms: what your monthly commitment would be, how long you may have to repay the loan, and the consequences of a failure. If some aspect of the agreement is not clear to you, please do not hesitate to ask for clarifications or changes.