Various Bank Loans Available in India

In India, loans are broadly categorised into secured and unsecured loans, each with its unique types, features, benefits, and requirements.

Secured Loans

Secured loans require the borrower to pledge an asset (collateral) such as property, gold, or securities. The collateral reduces the lender's risk, resulting in lower interest rates and often easier approval processes.

Common types and features include:

Home Loans/Mortgage Loans: Used to purchase or renovate real estate, secured by the property itself; typically offer longer repayment terms and lower interest rates.
Loan Against Securities: Loans taken by pledging investments like stocks, mutual funds, bonds, or insurance policies as collateral. Lenders usually provide up to 70% of the pledged asset’s value.
Gold Loans: Borrowers can pledge gold ornaments or jewellery as collateral to get money.
Loan against Fixed Deposit: A type of secured loan that can be obtained by pledging a fixed deposit account as collateral.

Benefits of Secured Loans:

Lower interest rates compared to unsecured loans due to reduced lender risk.
Higher loan amounts and longer repayment tenures.
Easier approval if collateral value is sufficient.

Requirements for Secured Loans:

Ownership proof of the asset being pledged.
Asset valuation by the lender.
Borrower’s creditworthiness and income details.

Unsecured Loans

Unsecured loans do not require any collateral and are granted based on the borrower's credit score, income, and repayment capacity. They typically have higher interest rates due to the greater risk to lenders.

Common types include:

Personal Loans: For various personal uses without specifying purpose.
Business Loans: To start, maintain, or expand a business, provided the business operates in India, and the borrower meets income and credit score criteria.
Education Loans: To finance educational expenses without collateral.
Credit Cards and Payday Loans: Short-term credit facilities without security.

Features of Unsecured Loans:

No asset collateral required.
Faster processing and disbursal, sometimes on the same day.
Based primarily on financial history and creditworthiness.
Flexible use of funds as per borrower’s needs.

Benefits of Unsecured Loans:

No risk of losing personal assets.
Convenient and quick access to funds.
Suitable for those without valuable collateral.

Requirements for Unsecured Loans:

Stable income source or stable business of at least 3 years (for business loans).
Strong credit score reflecting good repayment history.
Proof of identity, address, and income.

In summary, secured loans are backed by assets, offering lower interest and higher amounts but require collateral, while unsecured loans rely on creditworthiness, offering flexibility and quicker access but at higher interest rates and lower loan amounts. The choice depends on the borrower’s asset availability, credit profile, and funding needs.

For home loans, Indian citizenship, residence, and a monthly income of at least 10,000 are required. A CIBIL score of 750 or higher is necessary for loan approval. Non-residents can apply if they hold an Indian passport, a Person of Indian Origin (PIO) with a foreign passport, or an Overseas Citizen of India (OCI). The applicant's age should be between 21 and 70. The maximum loan term is 30 years.

For personal loans, the nature of employment should be working for a multinational corporation, a public limited company, or a private limited company. The age should be between 21 years to 60 years. The minimum monthly income should be those who earn a minimum of 25,000 net income per month. Individuals with at least two years of work experience, with at least one year with the current employer are eligible.

Flexi loans let borrowers take out money up to a specific limit through an overdraft or a credit line facility, and interest is charged only on the amount used by the borrower and not on the total sanctioned amount by the lender.

Loan against Fixed Deposit is a type of secured loan that can be obtained by pledging a fixed deposit account as collateral. The loan does not affect the FD interest, and the loan duration is the same as the FD tenure.

Examples of unsecured loans include credit cards, personal loans, and education loans. Secured loans require collateral, such as a home or car, while unsecured loans do not.

Education loans require the applicant to be a resident of India, have received confirmation of admission to a recognised educational institute in India or abroad, be between 18 and 35 years old during the loan application process, and be pursuing a graduate/postgraduate degree or a postgraduate diploma. A solid academic record speeds up loan approval.

Education loans are unsecured loans granted to students who want to pursue higher education in India or abroad. Interest rates for education loans in India are usually lower than other unsecured loans, ranging from 8-16% per annum.

Loan against Property has a minimum age limit of 21 years and a maximum age limit of 65-70 years. The employment status can be a salaried or self-employed individual. The minimum income is Rs 25,000 per month or Rs 3 lakh p.a. The work experience should be a minimum of 1-5 years. The maximum loan amount is up to Rs.25 crore. The credit score should be a CIBIL score of 750 or more. The repayment tenure is 15-20 years (Maximum).

Loan against Security requires the borrower to be a resident of India, be at least 21 years of age, and have an employment status as a salaried or self-employed individual. The bank should approve the security against which the loan is being availed.

Credit card loans can be availed based on a credit card user's credit limit and repayment history. Interest rates for credit card loans are usually higher than personal loans, going as high as 53% per annum.

Payday loans are offered for a shorter duration, usually until the borrower's next payday, and are meant to meet urgent and small financial needs. Interest rates for payday loans are extremely high and can range from 1% to 15% per day.

Banks offer two main categories of loans: secured and unsecured.

Personal loans can be used for any individual or professional purpose and are usually disbursed quickly with flexible repayment tenures. Interest rates for personal loans in India range from 8-15% per annum and depend on the borrower's credit score, income, loan amount, and tenure.

Loan against PF/EPF allows individuals with a PF account to borrow money against their accumulated PF balance, but can only be withdrawn for specific reasons like medical emergencies, buying a home, weddings, etc.

Loan against Property (LAP) is a type of secured loan that allows borrowers to use their property as collateral to raise funds for any financial requirement. Interest rates for LAP in India range from 8.40% to 12.50% per annum.

Loan against Security allows borrowers to use their securities, such as stocks, mutual funds, and insurance policies, as collateral for the loan. Lenders usually sanction up to 65% of the NAV of eligible shares and equity funds and up to 85% of eligible debt funds as a loan.

Short-term business loans require Indian citizenship, aged 25-65, self-employed for at least three years, documented business turnover and 2-3 years of tax returns, provide a business balance sheet demonstrating revenue and cash flows, and maintain a credit score of 685 or higher.

Gold loans require individuals who own gold jewellery or specially minted gold coins sold by banks. The age of the applicant should be 18 years and above. Total carats of gold that can be pledged should be 18 carats or above. The maximum loan amount is at the discretion of the bank. The tenure is as per the lender's terms and conditions.

Examples of secured loans include home loans, auto loans, and gold loans.

Home loans are loans used to buy a house or property, with a tenure of 15 to 30 years. Interest rates for home loans in India vary but generally range from 8.40% to 15% per annum.

Gold loans allow people to borrow money by pledging gold ornaments or jewellery as collateral. Interest rates for gold loans in India usually range from 8% to 18% per annum.

For Loan against PF/EPF, employees can withdraw their shares with interest or six times the monthly salary (whichever is lower) for medical purposes. After three years of EPF membership, employees can withdraw up to 90% of their EPF corpus to repay a home loan. After seven years of EPF membership, employees can withdraw 50% of their employee's contribution with interest for a wedding. After five years, employees can withdraw an amount equal to 12 times their monthly salary for house renovation or reconstruction. After five years, employees can withdraw either 24 times or 36 times their monthly salary for purchasing or constructing a new house. Employees can withdraw the entire EPF balance after turning 58, and 90% of it is accessible after reaching 54. If employees are unemployed for over a month, they can withdraw 75% of their EPF balance. The remaining 25% can also be withdrawn for unemployment exceeding two months.

Lower interest rates for loan against securities, such as equity funds or mutual funds, are often associated with reduced lender risk due to the collateral provided.
Fixed deposit accounts can be pledged as collateral for a loan against fixed deposit, which does not affect the FD interest and has a loan duration equal to the FD tenure.
Unsecured loans, like credit cards or payday loans, do not require collateral but are characterized by higher interest rates and quicker processing times due to their greater risk to lenders.
To be eligible for a loan against property, borrowers must be residents of India, with a minimum age of 21 years, a stable income source, and a minimum income of Rs 25,000 per month or Rs 3 lakh annually.
In summary, personal finance involves managing finances for both businesses and individuals, including using various financial tools like credit cards, personal loans, and banking and insurance services, while also monitoring credit scores, analyzing equity and debt funds, and making informed decisions concerning secured and unsecured loans.