A loan is the lending of money to an individual for his/her personal needs at a fixed or variable interest rate. When the loan is repaid by a borrower, he/she is liable to pay both principal and interest components to the financial organization providing the loan.
Loans in India can be offered by Banks and NBFC (Non-Banking Financial Companies). While we all know about banks, let us get a basic understanding about Non-Banking Financial companies:
NBFC’s are financial institutions which can offer various loans to customers but cannot open current or savings accounts of customers (or get demand deposits from customers). NBFC are also not part of payment or settlement process, hence in you need to transfer money between accounts or issue checks, you cannot use NBFC accounts.
|Banks||Non Banking Financial Institutions.|
|Speed of Loan Processing||Better|
|Ease of documentation||Better|
|Discounted Rates for Females||Better|
Now that we have an understanding about Banks and NBFC’s, let us discuss various types of loans available to customers in India.
- Home Loan
- Personal Loan
- Education Loan
- Business Loan
- Vehicle Loan
- Gold Loan
- Agriculture Loan
Home loans provided by banks & NBFC’s can be used for:
- Purchase of Land
- Construction of home
- Purchase of home
- Renovation / extension of existed home
Home loans taken by banks cannot include the expense of stamp duty and registration, NBFC’s can offer loans to the customer on complete home price ( including the cost of home + stamp duty + registration ).
Personal loans are given to customers in need of money for a financial emergency or any other kind of spending which they think is necessary. Both banks and NBFC’s prefer giving personal loans to employed people with good credit history because these customers draw a fixed salary. Interested, read our details article about personal loans.
Education loan is given to students who wants to pursue higher education. The applicant’s annual family income and the course pursued are primary determinants for the applicable loan amount. These loans are normally given up to 15 lakhs and repayment of loan does not start until after completion of the course. Generally, these loans have lower interest rates and loans below Rs 4 lakhs does not need a security or guarantor.
Business loans can be availed for a variety of reasons, including but not limited to, business expansions, working capital, etc. This loans can be availed in the range of Rs.50,000 and up to Rs. 75 Lakhs. These loans are typically given to both professionals ( like Doctors, chartered accountants, company secretaries, architects, etc ) and non-professionals ( like traders and manufacturers )
Vehicle loans in India can be used to purchase a new and old vehicle. These loans generally provide a fixed rate of interest option while repayment through EMIs. This keeps you assured of a fixed repayable amount on a monthly basis towards repaying the loan so that you can plan your finances. You can receive this loan up to 100% of the vehicle’s on-road price.
Gold loan is provided against collateral in the form of different types of gold jewelry or gold coins. You have to deposit your gold with the lender i.e. NBFC or bank and you get the deposited gold ornaments or coins back only after you have paid back the loan amount in full including interest. Gold loan business, being secure, features short processing times, a low-interest rate and short to medium term tenure.
Agricultural loans are loans that are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisciculture or purchase of land or agricultural tools. The agricultural policy of the Government of India also envisages substantial credit flow to increase agricultural production and productivity.
Do you have any questions about loans, please mention in the comments section below and we will try our best to answer.