Taking a loan has become a common financial tool these days. Be it marriage, travel, buying a house or higher education, people prefer taking a loan for their needs. So let us understand what a loan is and its different types.
Whenever we need money, we take a loan.
What is a loan?
A loan is an amount that a person or organization borrows from a bank or financial institution. This borrowed amount has to be returned with interest within a fixed time period. It is used to meet unexpected expenses, emergencies or to fulfil bigger financial goals.
What is a Term Loan?
A term loan is a loan that is given for a fixed duration – say from 1 to 10 years. In this, the borrower has to repay a specific amount along with interest. There are 3 main types of term loans:
Loan Type
Description
Duration
Short Term Loan
Loan to be repaid quickly, for cash shortage
1 year or less
Intermediate Term Loan
For planned purchases like car
1-5 years
Long Term Loan
For house, property purchase
3 years or more
How many types of loans are there in India?
In India, mainly two types of loans are given:
-
- Secured Loan
These loans are given against some collateral (mortgage), like property, gold, FD, shares. Their interest rate is usually low. Common secured loans are:
Gold Loan: Take loan by keeping jewellery as collateral.
Loan Against Securities (LAS): Loan against shares, mutual funds, LIC policy.
Loan Against Property (LAP): Lending against property.
Home Loan: For buying, building or renovating a house.
Business Loan: For expanding business, paying salary, purchasing inventory.
-
- Unsecured Loan
There is no collateral in this. These loans are given on the basis of your credit score, income and repayment history. Interest rate is higher.
Personal Loan: Multipurpose loan (wedding, travel, education etc.)
Wedding Loan: To cover wedding expenses.
Education Loan: For higher studies.
Medical Loan: For emergency treatment or hospital bills.
Travel Loan: For vacation or foreign trip.
Debt Consolidation Loan: For merging existing loans.
Home Renovation Loan: For home repair, painting, fittings.
Benefits of taking loan:
Financial Help: Money is available at the time of need.
Liquidity Improvement: Big goals can be accomplished without delay.
Fulfilling dreams: It helps in buying a house, car, starting a business.
Improving Credit Score: Repayment on time improves the score.
Tax Benefits: You get exemption in income tax on home and education loans.
Flexible Repayment: EMI options are available as per your convenience.
How to take a personal loan?
It is easy to take a personal loan from companies like Hero FinCorp:
Download the app
Register with your mobile number
Fill in your personal and financial information
Scan and upload documents
Accept loan after getting approval
The loan amount is transferred to your account
Conclusion:
Loan is a powerful tool that fulfills your financial needs on time. Every loan has its own specific use, and it is very important to understand its terms. Before taking a loan, always check the interest rate and repayment conditions carefully. Taking a loan with proper planning can take you on the path of financial growth.