A Comprehensive Guide to Different Types of Loans Available in India

Loans have become an integral part of modern-day life, especially in India. Loans help people to meet their various financial requirements such as purchasing a house, car, education, or starting a business. In this article, we will discuss the different types of loans available in India, their features, and eligibility criteria.

Personal Loans

Personal loans are unsecured loans that can be availed for any personal use such as medical emergencies, travel, wedding expenses, or debt consolidation. These loans are usually given for a short duration, ranging from 1 to 5 years. The interest rates for personal loans vary from 10% to 24%, depending on the borrower’s credit history and the lender’s policies. The minimum and maximum loan amounts offered by most lenders are Rs. 10,000 and Rs. 50 lakhs, respectively.

Home Loans

As the name suggests, home loans are secured loans that are taken to purchase a new home or for home renovation. The property itself is kept as collateral in case of default.

The interest rates for home loans in India range from 6.75% to 8.50% depending on the loan amount and the lender’s policies. The loan tenure can be up to 30 years, and the minimum loan amount offered by most lenders is Rs. 1 lakh.

Car Loans

People generally opt for car loans to purchase a new or used car. These loans are secured, and the car itself is kept as collateral in case of default. The interest rates for car loans in India range from 7.50% to 12%, and the loan tenure can be up to 7 years. The minimum loan amount offered by most lenders is Rs. 1 lakh.

Education Loans

Education loans are used to finance higher education, either in India or abroad. These loans are usually unsecured loans, and the loan amount can be up to Rs. 1 crore. The interest rates for education loans in India range from 6.75% to 12%, and the loan tenure can be up to 15 years. These loans also come with a tax benefit under Section 80E of the Income Tax Act.

Business Loans

Incresing becoming popular, these loans are given to entrepreneurs or small business owners to finance their businesses. These loans can be secured or unsecured loans, and the loan amount can be up to Rs. 50 lakhs. The interest rates for business loans in India range from 10% to 18%, and the loan tenure can be up to 5 years.

Gold Loans

Old truly is gold in this case because gold loans have been popular for ages. These loans are secured by pledging gold as collateral and are usually short-term loans with a higher interest rate. The loan amount for gold loans can be up to Rs. 20 lakhs, and the interest rates can range from 7% to 29%.

Loan Against Property

Loan against property is given by keeping a property as collateral. The loan amount depends on the value of the property, and the loan tenure can be up to 15 years. The interest rates for loan against property in India range from 7% to 11%, and the minimum loan amount offered by most lenders is Rs. 5 lakhs.

Agricultural Loans

Lastly, agricultural loans are given to farmers to finance their agricultural activities. These loans can be short-term or long-term loans, and the loan amount can be up to Rs. 50 lakhs. The interest rates for agricultural loans in India range from 7% to 9%, and the loan tenure can be up to 15 years.

Summing Up

Understanding the different types of loans available and their eligibility criteria can help borrowers make informed decisions about which loan to choose. In recent years, the National Financial Capability Study (NFCS) has shown that financial literacy levels in India are still relatively low, which can make it difficult for people to make informed financial decisions. Therefore, it’s important for people to educate themselves about the different types of loans available and their terms and conditions before applying for a loan.