A loan is a sum of money borrowed by the bank and the private financial company to help with certain planned or unplanned events. The lender must repay the loan, including interest charged during a stipulated period.
Types Of Loan
Personal loans
Personal loans do what they say on the can: they are loans for people to use as they see fit. A personal loan is one that can be used for almost anything, as long as it is legal. Personal loans are also called instant payday loans.
Student loans
Student loans are specifically for those looking to study at the university. Student loans are being regulated and approved by the Government, paid directly to you and your university.
Mortgage loans
A mortgage is a large loan, specifically for those who buy a property. Mortgages are only for the purchase of properties (and cannot be used for anything else).
Car loans
Buying a car directly can be expensive, and a popular option is to obtain financing or use a loan to buy.
Commercial loans
When any company needs financing, regardless of size, you can apply for a commercial loan. Like a mortgage, this has a specific purpose and can only be used to finance a commercial company or something within an existing or newly created company.
Secured loans vs Unsecured loans
The two main types of loans available in India are secured loans and unsecured loans.
There are 2 types of secured and unsecured loans. Secured loans are offered against collateral while unsecured loans are offered without collateral. The interest rate varies for both loans and documentation is different.
- Secured loans: Secured loans are those in which there is a need for collateral against the amount borrowed as a fixed or mobile asset. In case of default of the loan amount, the bank will assume ownership of the guarantee. In general, car loans and mortgage loans are secured loans. The interest rate on these types of loans will be comparatively lower, since the risk to the lender is low, although there are many other factors that decide the interest rate.
In this secured loan there will be a guarantee attached to the loan amount. Guaranteed loans in the market are
- Home loan
- Car loan
- Mortgage loan
- Commercial loan
- Unsecured loans: Unsecured loans do not require any collateral, but the lender will charge a high-interest rate on the money borrowed. The risk of the loan is equally high, the higher the interest rate. Here in the unsecured loan, there will be no guarantee attached. The loan will be granted according to the credit score. But the interest rate will be slightly high in unsecured loans compared to the secured loan. Some of the unsecured loans are
- Personal loan
- Credit Card Loan
Money is the most crucial element of business. It is required to operate the business without problems and without a financial crisis. There are many sources of business financing available in India, commercial loans are a source.