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Take a Personal Loan Only When it’s Necessary

This is a fact that the interest rate charged for a personal loan is comparatively higher than the other loans. So, keeping this in mind one should always apply for a personal loan only when it’s necessary. It is also important to understand that while a loan helps you pay for your short-term goals, you will be repaying it for the next few years without any fail. Hence, it becomes important to ensure that you will be able to make the monthly payments within your income.

Is a loan the right product for you?

A loan is one of several types of credit that you can apply for, but it might not necessarily be the right option for you. The likes of credit cards, store credit and Buy Now, Pay Later agreements are all viable alternatives, depending on what you’re buying. 

If you have had several loan applications rejected, it’s a good idea to consider whether an alternative could be a good option for you before proceeding with another loan application.

Types of Loan

Secured Loans

Secured loans are loans that require some sort of collateral to be provided as security for the loan. Collateral can be anything from jewelry to real estate. If you don’t pay back the loan, the lender can take possession of the collateral that you pledged and sell it to recover its principal and interest debts.

The loan amount is based on the value of the security, and the interest rate is fixed. These types of loans are fixed-rate loans, and they are not adjustable.The main advantage of these types of loans is that they are easy to get

Unsecured Loans

Unsecured loans are the most common types of loan in India. The term “unsecured” refers to the lack of need for security or collateral to obtain these loans. In simple terms, this type of loan is given with no collateral, and you do not have to put your property or any other asset as security for the loan.

To avail of such loans, you have to be capable enough to pay back the loan without any difficulty.

The interest rate on these loans ranges from 8% to 24% per annum, depending on the lender.

Types of Secured Loans

Home Loans

A home loan is a type of financial product that is used to finance the purchase of real estate, such as an apartment complex or a house. The buyer pays back the loan with interest and monthly payments over time. The home buyer receives a mortgage for up to 90% of the property value. The rest of the amount is referred to as the down payment. These loans generally come with longer tenures, and the interest rates start at 8.30%.

Loans Against Property

A loan against property is a type of secured loan where the borrower agrees to use their home as collateral for the loan. A lender may accept a home mortgage as collateral for a loan, whether it is owner-occupied or investment property. The lender will then lend you the money you need, and you will pay them back by making regular payments on time. The amount of money you can borrow is limited by the value of your home.

In most cases, this type of loan has higher interest rates than others because you are using your house as collateral. However, these rates are still much lower than what you would pay with an unsecured loan (such as credit card debt), and they usually include tax benefits.

Gold Loans

A gold loan is a type of secured loan that you can get with the help of your gold. It is a good option for those who have their own gold and want to use it as collateral for a secured loan. These loans are generally used for short-term needs and come with a shorter repayment tenure when compared with other secured loans like home loans and loan against property.

Loans Against Fixed Deposits

Some banks may allow you to get a loan against your fixed deposits, and in most cases, the value would stay closer to your fixed deposit account. Banks understand that FDs are safe investments, so getting a loan against your fixed deposit won’t be a problem.

Types of Unsecured Loans

Personal Loans

A personal loan is a short-term borrowing that you can use to cover expenses not covered by other types of loans. Personal loans are typically used when you need money for emergencies, such as paying medical bills or paying credit card debt, etc.

A personal loan may have low monthly payments, but it will have high-interest rates. The interest rates are set by the lender based on the amount of money being borrowed, the length of time for which it must be repaid and other factors. Having a good credit score can make it easier for you to get a personal loan.

Take a Personal Loan Only When it’s Necessary

This is a fact that the interest rate charged for a personal loan is comparatively higher than the other loans. So, keeping this in mind one should always apply for a personal loan only when it’s necessary. It is also important to understand that while a loan helps you pay for your short-term goals, you will be repaying it for the next few years without any fail. Hence, it becomes important to ensure that you will be able to make the monthly payments within your income.

Short-term Business Loans

Short-term business loans are available to businesses that are facing a temporary cash crunch. These loans come with a maximum term of one year and interest rates that are flexible and negotiable. They can be used to pay for working capital, such as inventory purchases or equipment purchases. Short-term business loans are usually unsecured and do not carry any collateral protection.

Flexi Loans

A flexi loan is an unsecured loan that allows you to get funds from your approved limit whenever you want them. There is no limit on the number of transactions you can do, which gives you the freedom to withdraw cash from your limit without any restrictions and at no extra cost. The interest on flexi loans should only be paid when the amount is used.

Education Loans

An education loan is a short-term, unsecured loan that can be used to finance the cost of higher education. An education loan can be taken out for any educational purpose, such as undergraduate, graduate or professional degree programs.

The reason why loans have become so popular is because they offer convenience and flexibility. You can use them for post-secondary school tuition, living expenses and other incidentals. The interest rate on these types of loans can range from 9% to 14%.

Vehicle Loans

The basic idea behind vehicle financing is to make sure you have enough money to purchase a new or used vehicle. The amount a person can borrow is determined by their credit score, income and the interest rate that the lender has set. These loans have some of the highest interest rates and fees because they are considered unsecured, meaning that the bank holds no collateral to guarantee repayment.

The reason why loans have become so popular is because they offer convenience and flexibility. You can use them for post-secondary school tuition, living expenses and other incidentals. The interest rate on these types of loans can range from 9% to 14%.

Final Thoughts

Loans are an important resource that individuals can use to accomplish a variety of goals. Whether you want to buy a home, start a small business, or finance a new car, a loan can be an invaluable resource. Knowing the types of loans available to you in India will help you when you need funds that you haven’t budgeted for, so make sure you have the necessary information and stay prepared.