Bank loan and its types

A bank loan is one of the most popular ways to raise funds for different needs. Loans are typically of a longer duration and are repaid with interest. It is very common for a borrower to pay back the loan in installments. Each installment comprises of principal and interest and is repaid over a fixed duration.

The types of bank loans in India are:

1. Personal loan:
A personal loan is an unsecured loan. These bank loans are quickly disbursed and have a repayment period up to 5 years. Since these loans are high risk, the rate of interest is higher.

2. Home loan:
A home loan is one of the most popular loans in India. The funds are used to purchase a house. This is a secured loan, i.e. the bank secures the house purchased. The loan amount is given for a pre-decided percentage of the house value.

3. Consumer durable loan:
This bank loan is available for borrowers who want to buy consumer durables. Some banks even give up to 100% financing for purchasing these electronics.

4. Car loan:
This loan is available to people who want to purchase a new car. The new car acts as the security for the loan.

5. Two wheeler loan:
This loan is similar to the car loan, except that the two-wheeler purchased is the security for the loan.

6. Business loan:
These are unsecured loans meant for business expenses and working capital needs.

7. Loan against property:
This bank loan is availed by mortgaging property. The value of the property is assessed based on market rates.

8. Educational loan:
These bank loans are taken for higher education, whether in India or abroad. These loans have a moratorium, which means repayment begins a number of years after taking the loan.

9. Loans for professionals:
These are loans similar to business loans given to professionals like doctors, accountants etc.

10. Overdraft against salary:
This loan is given against salary accounts.

11. Gold loan:
This loan is given out based on the value of gold mortgaged with the bank. These loans don’t have a specified end use for funds.

12. Loan against assets:
These are loans given out against assets such as securities and rental receivables.

13. Government sponsored loans:
These are loans sponsored by different Government schemes. These loans can be availed for Rs. 5,000 too.

14. Rural loans:
These loans are given to farmers to fulfill their requirements.

15. Loan against securities:
These are loans given against shares, or government securities. These funds can be used for any purpose.

16. Loan on credit cards:
This loan provides an option to convert a large credit card purchase into a loan for simpler repayment.


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