Loan simply means individual borrowing money from a bank or other financial institutions is called loan. The loan can be bought for various purposes and it can be a very useful tool for financial growth of an individual if the loan is utilized properly.
Every loan has three important factors those are the amount of money which is borrowed, interest rate and tenure of the loan. Loans are classified into two categories secured loans and unsecured loans.
Secured loans – The secured loans are loans which are given by a bank or financial institute wherein borrower’s asset is used as collateral or security. For example loan against property is a kind of secured loans wherein borrower’s asset is used as collateral or security if the individual fails to return borrowed amount than in this case bank or financial institute has legal right to take over borrower’s asset.
Unsecured loans – Unsecured loans are loans which are given by a bank or financial institute wherein borrower’s asset is not used as collateral or security, unsecured loans are given on the individual’s creditworthiness. For example, personal loans are a kind of unsecured loans, personal loans are usually given by banks to the individual on the basis of creditworthiness and credit history.
Difference between a secured loans and unsecured loans
Secured loans are easier granted by banks while unsecured loans are harder to obtain because secure loans are less risky for banks to recover.
Secured loans usually granted at a lower rate of interest as compared to an unsecured loan because unsecured loans are considered to be risky loans by lenders.
In Secured loans, the borrower needs to provide an asset as collateral or security whereas unsecured loans can be given without any collateral or security.
Different Types of Loan
Home loans – If you have the desire to buy a house, getting a home loans can be helpful for you to buy your dream house. Home loan offers you the financial assistance and assists you to buy a house for your loved ones. This loans usually come with longer tenures. The interest rates in India on home loans vary from bank to bank. If an individual has a good credit score then there are fair chances that he/she will easily be granted loan on lower interest rates. Home loans are usually taken to buy new homes but the funds can also be used for home renovations or construction of under-construction houses.
Personal loans – Personal loans are generally unsecured loans which are granted by banks. The money granted in the personal loan can be used as any personal expense such as buying new gadget, television, furniture or any other personal use materials. Banks usually didn’t ask for any collateral or security from its customers when a personal loan is offered, a personal loan is generally offered of the basis of creditworthiness and good credit score. Interest rates are generally higher is personal loans as compared to other loans, this loans can be a good option for a person to fulfil its materialist desires.
Gold loans – The gold loans are kind of secure loans in which gold is used as collateral or security, most banks and financial institutions offer a gold loan. The gold loan can be used to raise funds in quick time in case of any financial emergency such as medical treatment, business expansion, education expense or purchasing any other object.
Agriculture loans – Agriculture loans are usually granted to farmers so they can meet the expenses of general agricultural requirements and. Agriculture loans can be short term or long term. Agriculture loan can a good option to raise money for crop cultivation or farmers can buy new machinery such has tractor etc for farming.
Education loans – Education loans are usually provided to students so they can meet their financial requirements related to their education such as university fees, books expense and accommodation etc. An education loan can be a good tool to continue higher education because every parent cannot afford the expenses of higher for their children. Education loans are usually granted with low-interest rates with flexible terms and conditions.
Benefits of Loans
The flexibility of loans – Loans usually comes with flexible terms and conditions. The interest rates, tenure of the loan and amount can be negotiated between lenders and borrowers. Adjustments can be made even after the loan is given. You have a choice to choose the tenure and repayment method as per your comfort. Once you borrow a loan, you have a choice where and how to spend funds.
Important for growth – Everyone needs money to grow their business or even start their business. Everyone has its own requirements of funds some want to purchase new machines for business or some want to get higher education to get better jobs so the loan can be your helping hand in your growth. Having a loan will allow you to chase your dreams or expand your business. Once achieve success in your projects it allows you to get more loans on easy conditions.
Quick and Fast – The loans generally take an hour to approve or disapprove. If your loan amount is sanctioned then you will receive the amount within a few hours.
Life savers – These loans make you out from critical situations and you can easily get the money during an emergency if you have the guarantee equal or more to the amount you borrow.