20 Types of Loans in India

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Loans

There are different types of loans available in India. You can select the loan based your requirement. However, it is good ideas to explore the various loan options before taking loan. Today I will share information about 20 Types of Loans in India.

20 Types of Loans in India

Home Loan

Home loan is most common loan available in India. Home loan is given by bank in order to purchase property. Home loan is available with two variant fixed interest and variable interest. It is good idea to purchase variable interest rate loan. Home loan gives you tax benefit also.

Interest rate: 9 -11%

Collateral: Physical property

How much can you get? – 85% of property value

Pros and Cons

  • You can avail bigger loan if your income level is high.
  • Flexibility of repayment
  • Tax Benefits
  • Home Loan is given maximum 85% of property value

Education Loan

If you are student and seeking money for higher education you can apply for Education Loan. Education loan is available for Indian and foreign education.  You can avail tax benefit under section 80E for the education loan.

Interest rate: 11-14.5%

Collateral:   Varies from bank to bank.

How much can you get? – Depends upon collateral value.

Pros and Cons

  • Longer repayment
  • Tax Benefits
  • High Interest rates

Car Loan or Vehicle Loan

If you want to purchase new vehicle you can opt of vehicle loan or car loan. You can avail this loan from bank. You need to submit income proof in order to avail this loan.

Interest rate: 9.6-10.6%

How much can you get? – Up to 90% of vehicle value depending on your income documents.

Personal Loan

Personal Loan is loan given by bank or financial organization without any collateral. This loan is given purely based on your credit profile and credit score.

Interest rate: 15-25%

Collateral: Not required

How much can you get? – Based on your credit profile.

Pros and Cons

  • Banks cannot get hold of your assets if you default.
  • Loans are disbursed quickly, but need a formal application.
  • Given only to the salaried, self-employed or professionals.
  • Personal Loans are costly.

Loan against Car

If you are owner of a car you can apply for loan against car.

Interest rate: 13-17%

Collateral: Your Vehicle

How much can you get? – 70-75% of your car value.

Pros and Cons

  • If your car model is a popular with a good resale value, you can get a bigger loan.
  • Banks may not lend against vehicles that are more than 5 years old.

Loan against Mutual Funds or Shares

If you have invested money in shares or mutual funds you can avail loan against this investment.

Interest rate: 12-16%

Collateral:  Mutual Funds and Stocks investment

How much can you get? – Up to 60% the value of equity funds and 50% for shares.

Pros and Cons

  • A dividend will be paid on full repayment/closure of loan.
  • Bank can sell stock or ask for extra collateral investments in case of correction in share price.

Loan against FD

If you have invested money in fixed deposit you can apply for loan against FD.

Interest rate: 1-2% above FD rate 8.5-9.5%

Collateral: Your Fixed Deposit

How much can you get? – Up to 90% of the value of deposit.

Pros and Cons

  • The loan can be taken on the very next day after making the deposit.
  • If the deposit is held jointly, then all account holders have to sign the loan documents.
  • If the loan repayment is not done then the bank can close the account to recover the loan amount.

Loan against Life Insurance

This type of loan is given against life insurance policy documents.

Interest rate: 14%

Collateral:  Life Insurance Policy

How much can you get? – 85-90% of the surrender value of the policy

Pros and Cons

  • Loan can be applied for fund requirement any purpose.
  • Only policies eligible for loan can be used for loan application.
  • Policy needs to be assigned in name of the lender.

Loan against Property

Interest rate:  11-15%

Collateral:  Physical property

How much can you get? – 60-70% of property documents

Pros and Cons

  • Documentation is similar to home loan but the processing time is less.
  • Prepayment charges apply.

Top up Home Loan

Top up home loan is also known as home renovation or modification loan. This loan is additional loan above home loan.

Interest rate:  12%

Collateral:  Existing Home Loan

How much can you get? – Up to 70% of existing home loan

Gold Loan

Interest rate:  12-13%

Collateral:  Physical Gold

How much can you get? – 75% of the value of Gold

Pros and Cons

  • Sanction of loan can be obtained faster.
  • Loan Application does not require many documents.
  • You need to submit your gold holding, which may be sold off by the lender if the loan is not repaid in time.

Loan from PPF

Interest rate:  2% more than PPF rate

Collateral:  Not required

How much can you get? – The amount is restricted to 25% of the balance at the end of the second year

Construction Equipment Loans

You can apply for this loan for purpose of procuring equipment’s for farming or for business.

Interest rate:  12%

Collateral:  –

How much can you get? – 95% of the invoice value

Business Loan

Business loan can be availed to start or run your business.

Interest rate:  12-15%

Collateral:  Varies based on your requirement

How much can you get? – Variable

Pros and Cons

  • You can get business loan without collateral if your business is doing well.
  • You can avail this loan for longer duration.
  • Interest rates are high.

Rural Loans

Rural loans are mainly designed for rural farmer for meeting agriculture and production expense.

Interest rate:  13.5% -16%

How much can you get?  – Depends upon income proof.

Mudra Loan

Mudra loan is business loan given by government of India to Small and Medium enterprise.

Interest rate: 12- 15% (Depends upon bank)

Collateral:  Not required

How much can you get? – Up to 10 Lac for small business

Pros and Cons

  • Very good loan option for small business
  • Easy to obtain finance from Mudra
  • Loan limit is 10 Lac only.

Cash against Invoice

If you have already got the order and you want cash in order to complete the transaction, you can opt for cash against invoice.

Interest rate: 12-17%

How much can you get? – 90-100% of invoice amount

Pros and Cons

  • Faster processing
  • Low repayment terms.

Over Draft

Bank will provide overdraft facility against asset. This facility can be used by individual to fulfill emergency requirement.

Interest rate:  1-2% higher against submitted asset documents (Usually FD)

Collateral:  Asset documents

How much can you get? – Depends on asset value.

Working Capital Loan

If you are in need of working capital to run the business you can opt for working capital loan.

Interest rate: 12-17%

How much can you get? – Depends on your income documents and financial statements.

Pros and Cons

  • Faster processing
  • Higher Interest rate
  • Low repayment duration.

Loan from unorganized sector

Last option for availing loan is from unorganized sector. This option is not advisable in majority of case. It is very difficult to avail this type of loan and it is very costly.

Interest rate:  20-25%

How much can you get?  –

Pros and Cons

  • Difficult to obtain this loan.
  • Interest rate and payment terms are unreasonable

Over to you –

Hope you have got information about loan type you are looking for.

Which Loan option is suitable for your requirement?

Do revert in case of any query.

20 Types of Loans in India

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Hi, I am Raviraj. I am passionate about money matters and finance. I have 10 years of rich experience in the field of financial planning, Investments & Insurance. I have written numbers of articles on this blog. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

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One Response

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    Jun 5, 2016 12:18 pm

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