Loan is process of lending some money from the financial institutions such as banks and others and repays it. The process of loan is quite easy and clear, one would be given lump sum amount at a time and then the person has to repay it in installments. There are different types of loans and different types of interest rates associated with all these. There are different criteria for segregating the loans from one another. However, when we talk about Loans in India, there are different types of loans available with specific conditions. But all the loans are actually broadly classified and categorized and that is easy to understand.
So, here are the different type’s loans available in India.
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Secured Loan is a loan that you get against an asset you have. There are many examples of Secured loans in India. However, the amount of loan always depends upon the market value of the asset you have. If you are taking a loan against any property may be land or house, then it can be Secured Loan. The Car or Vehicle Loan, Gold Loan are of same category where you have an asset for your loan.
Unsecured Loan is the opposite of the Secured and you can get a loan without any asset. However, thorough documentation and impressive credit history are required for these kinds of loans. The amount of loan generally differs from individual to individual. However, the interest rate of the unsecured loan is greater than the others because of greater risks involved.
The Subsidized Loan is provided to the qualified people for qualified purposes. The major aspect of the loan is that there is no interest charged on such loan. These loans are generally given by Government or Nationalized Banks. Most common examples of such loans are the farmer’s loans by Rural or Gramin Banks for equipments line tractors or implementation of new technologies.
This is a kind of loan where fixed interest is leveled on the loan amount. However, the interest rate gets reduced as the amount gets repaid before the interest accumulates. This can also be seen in the rural part for promoting small scale business or for the farmers.
Open Ended Loans
This is a special loan where you can keep on taking loans several times and simultaneously repay it. However, such loans are generally restricted by some credit limit. One can only have certain amount of limit to take loans. However, you can repay the amount at any point of time and then take loan from it. Once taken, you do not have to do any documentation and other procedure. Credit Card is an Open Ended Loan where one can use the card to take loan and then repay it with installments or directly by choice. However, every credit card has certain amount credit limit that defines the loan.
Closed Ended Loans
Closed Loans are those loan in which borrower has to repay the entire amount with interest first to get another. You will get every details of how many installments you need to pay, what would be the duration of the loan and others at the time of taking the loan. Majority of the loans like Home Loan, Education Loan, and Vehicle Loan are few examples of such Close Ended Loans.
There are other different loans like Call Loans where one can take loans without much documentation and fixed maturity. The loans taken against PPF, Insurance, Mortgage, Funds are also types of Secured Loans and are very popular in India. Banks are major loan providers in India; however, there are other financial instructions that can provide the loans as well.