Loan is defined as a process of lending money from any financial institution like banks that is repaid. The concept of loan is very much clear and simple as the banks give its customers lump sum money at one time and then ask to repay in small installments for years. When it comes to the types of loan, there are a number of them, which are categorized as per the interest rates and other things.
Well, time to check the list of common types of loans found in Indian banks:
There are different types of loans and different types of interest rates associated with all these. There are different criteria for segregating the loans from one another. However, when we talk about Loans in India, there are different types of loans available with specific conditions. But all the loans are actually broadly classified and categorized and that is easy to understand.
Secured Loan: This type of loan can be acquired against your assets and you can find a number of examples of secured loans in India. But the kind of loan you need would often depend upon the market value of your asset. If you want a loan against your property (home or land) then you get a secured loan, whereas the money you get against the car or gold is also considered among this kind of loan.
Unsecured Loan: This kind of loan is just the opposite of the secured loan and you can find a loan without mortgaging your asset. But with proper documentation and good credit history one can get such types of loans from banks. The amount of loan can often differ from one person to the other. But the rate of interest on these loans is often greater as more risks are involved in it.
Subsidized Loan: These types of loans are given to qualified people for qualified reasons. The key element of this loan is that there is no interest charged, which is often given by the nationalized banks or the government agencies. Some of the common types of loans in this category are the Rural or Gramin Banks giving loans to the farmers for their equipment like tractor and other things.
Unsubsidized Loans: This type of loan is where you have fixed amount of interest leveled over the applied loan amount. But the interest rates are seen getting reduced as the amounts get repaid before the interest is seen getting accumulated. This can be seen under the rural part for the small scale industry promotion or empowering the farmers.
Open Ended Loans: This type of loans fall under the special category loan wherein you are seen taking loans for a number of times along with repaying simultaneously. But these loans are often confined by certain credit limit only. You can therefore avail only limited amount of bank loans under this category, while you can take this loan at any point of time and return anytime. Once you take this loan you do not need any kind of documentation or procedure in the coming future. Credit cards are the example of this type of loan, wherein you spend money and return the bank in installment or directly by your own choice. However, these have credit limits as per your credit score.
Closed Ended Loans: These kinds of loans wherein the borrowers are supposed to repay the whole amount with interest first in order to get the other. You will get all the details of the number of installments you are supposed to pay, the duration of the loan and other details you need to take a loan. The loans like Education, home or vehicle loans are the classic examples of such types of loans.
These are some of the common types of loans available in Indian banks, while there are other types as well, which can be obtained as and when required. However, are the most common ones, which people are seen taking from the banks in India.