We all need to borrow money at some point for various expenses. Did you know that you can avail different types of loans based on your reason for borrowing? In this article, we will take a look at common types of loans that you can access in India.
But first, let’s understand an important concept about loans – secured vs. unsecured loans.
> Secured loans are loans that are secured with collateral. Valuable assets such as jewellery or property may be kept as collateral.
> Unsecured loans are loans that do not have any collateral given to the lender.
Now, let’s get to the main types of loans you can take –
A personal loan is one of the most common types of loans. It can be taken for almost any requirement you have. For instance, you can take a personal loan to pay for your wedding, a much-awaited vacation, or even to renovate your home. The options are simply endless.
Personal loans may be secured or unsecured loans.
2.Credit card loan
A credit card loan is a loan that is given to you on your credit card. You may typically get an amount that fits within the pre-established credit limit on your card or even one that exceeds it. Your loan is then divided into EMIs that you need to pay. A credit card loan is usually given based on your record as a customer with the bank in question.
These are unsecured loans.
3.Line of credit
A line of credit is a unique type of a loan which is suited for those who do not want to borrow a large lump sum. In a line of credit, you get approved for a loan amount from which you can keep taking smaller portions of money as per your need. One of the biggest advantages of a line of credit is that you only get charged interest on the amount that you actually take out and not on the entire approved line of credit.
Your line of credit loan can be either secured with collateral or unsecured.
True to its name, an education loan is a loan given out for the purpose of funding studies. An education loan covers more than just the cost of the course fees. It can also cover the cost of accommodation, travel expenses, and any other living costs associated with pursuing higher studies. Education loans are your best bet for funding higher studies as they come with a moratorium of around 6 months to 1 year.
Education loans may be secured or unsecured loans.