The loan is the most common financial aid that people get to meet their expenses. The loan is taken –out by individuals and families for various reasons. The most common loans are taken out for education, marriage, business, and construction. Different types of loans are approved and given to eligible people by banks and financial institutions.
In this article, we will be discussing the types of loans and different ways to borrow money.
What is a loan?
The simplest meaning of loan is that it is termed as debt. The loan is a sum of money borrowed by the lender. This amount needs to be paid back to the lender, along with some interest. The lender gives a loan to a borrower for a specific time, within which the amount needs to be paid in full.
There are various types of loans given out by the lender. Read through the next part of the article to know about how many types of loan are available in India.
What are the different types of loans available today?
The loan is a significant help that any person can get to meet big or small expenses. Although there are different types of loans, here we will be considering only important ones.
Debt Consolidate loan
The first type of loan in the list is a debt consolidating loan. This type of loan is similar to a personal loan. In this loan type, the individual takes it out to pay all the existing debt. It is mainly taken-out to pay-off credit debt. With the help of a consolidate loan, any person can reduce his monthly payments at less interest rate.
Auto Loan
The second loan type, which is popular among people all over the world is an auto loan. Usually, when people want to buy a car, and they can’t afford it, they take an auto loan. Auto loans are specifically given to buying a vehicle. Auto loans are financed by different methods. It can be financed through banks, credit card unions, and car dealerships.
But of all the methods financing auto loan through the bank has a low-interest rate. However, auto loans interest is calculated based on the outstanding balance of the applicant.
Mortgage
Generally, a mortgage loan is taken out for purchasing a home. This is mainly because houses in any part of the world are expensive and not easily affordable. So in the situation, people take financial help from banks and lending platforms. The most common type of financial help that everyone can get is a mortgage.
A mortgage is a loan specially designed to help families become homeowners. This type of loan is the longest of all. Usually, a mortgage loan is given for 30 years fixed period.
Education loan or student loan
Both these types of loans are similar to one other. Education loan or student loan gives money to students to continue with their studies. The best part of this loan is that the students with weaker financial wealth can pursue their dream career. Also, education or student loan need not be paid back until the person graduates and gets a job.
The interest rate for a student loan is fixed. And education loans are approved by the banks, and their rates differ.
Agriculture loan
This loan type is very popular in India. This is because India’s economy is dependent on agriculture for their income. The loan is given by banks and financial institutions at a low-interest rate. The loan aids the farmers in carrying out agriculture activities.
Small business loans
Small-time businesses lack the funds to grow or improve their business. In such cases, they can get financial help from local banks. For getting this type of loan, the business owner needs to produce some documents. The documents are a business proposal in case of a new business. Along with personal guarantee and license for old business.
What are the different ways to borrow money?
The different ways to borrow money are as follows:
- Borrowing money from an employer
- Cash withdrawals from credit card, which is equal to a percentage of your card limit
- Taking out personal loans
- Pledging your property or home to take out a quick loan
- Loan against gold and bonds
- Asking for help to form money from family and friends.
The article has given the reader how many types of loans are available. The loans listed here are popular ones. Apart from this, other types of loans are overdraft and cash credit. The article has also listed the different ways to borrow money. We hope that the article helps understand the loan types and money borrows ways.