Loans tend to provide some respite in times of financial need. Many individuals fail to apply for the right kind of loan and blindly apply for only personal loan. This is because of restricted knowledge on different types of loan available in India.
Things to consider before applying for loan
- Check your Cibil score before you apply for a loan. This will ensure that you are not disappointed in case your loan is rejected or a lesser amount of loan is sanctioned.
- It is best to compare loans online. There are many portals that allow you the facility to compare loans before you take them.
- Many banks waive off processing charges during festive seasons. At other times the processing charges differ from banks to banks.
- Keep the documents ready, depending on the type of loan.
Further loans can be classified into secured loans and unsecured loans.
A secured loan is one in which there is a collateral backing.
Say for an example, when an individual takes an auto loan, a lien is created on the vehicle and the owner cannot sell the same, unless he pays the bank or the financial institution the loan that is outstanding.
An unsecured loan on the other hand is one in which there is no backing of an asset. As far as banks and financial institutions are concerned the classic case would be personal loans.
Different Types Of Loans in India
Banks usually consider around 40 per cent of an individual's income as living expenses. So if a person earns Rs 60,000 each month and spends Rs 25,000 as living expenses and Rs 20,000 on other EMI such as car loan, your eligibility will be considered on the remaining Rs 15,000.
Personal loans is the most lucrative of loans for banks. Interest rates on personal loans vary between 13 and 24 per cent depending on your creditworthiness and the bank involved.
Gold loan interest rates are lower as compared to personal loans and this is probably the edge. Processing fees are not charged on gold loans.
However, they are charged for valuation of gold. Most of the banks and companies take utmost care not to damage the ornaments during evaluation or storage.
Loan against fixed deposit will be around 11%-12%. One can always look upto fixed deposits, when in need for money.
Interest rate on personal loan are between 16-25% depending on the bank and the loan amount.
Hence it is better to go for loan against fixed deposit when in need of short term money
One can also avail loan against your insurance policies such LIC . However, the policy should be eligible to avail loan such as, it should have a surrender value which happens only after payment of 3 yearly premiums. Only after that you can avail for a loan which would be around 90% of Surrender Value.
Loan against property is pretty similar to personal loan; the only difference being you put a property owned by you as collateral against the loan. This property might be confiscated in case you default on the loan.
Another way is to pledge your shares, in case do not wish to sell them at this point. Shares can be pledged from any Depository Participant across the country.
Like loan against shares, one can also avail a loan against mutual fund investments or units.
Loan on Provident Fund
This loan can be availed against the balance in your PPF account. One can avail a loan from your PPF account from the 3rd year of opening your account to the 6th year.
Education loan is a must these days as individuals wish to pursue higher studies in India as well as abroad.
Amount is applicable for the deduction only on the interest repayment part, not on the principal amount of education loan
Approach a bank with written business plan. Each lender or financial institutions have their own criteria while disbursing loan.
Loan offers on car differ in respect of the car for which the finance is being taken i.e. used or new car. For different car types, banks offers differential rate of interest.