Personal loans are availed and provided for meeting personal needs. They are different from business loans. If you are availing a personal loan, banks may or may not ask you to specify why you are borrowing the money.
Personal loans are very easy to get in India, especially if you have the right documentation in place. Most loans are provided by banks, but there are other forms of lending service available as well. Personal loans are normally small loans, and the figures typically do not exceed 10-20 lakh rupees.
Personal loans can be either secured or unsecured. For a secured loan, you need to provide the lender with a fixed guarantee such as a property. For an unsecured loan, there is no security provided by the borrower. Unsecured loans normally have higher interest rates than secured loans due to higher degree of risk incurred by the lender.
Home loans, education loans, and vehicle loans are essentially personal loans as well, but they are normally classified separately. This is due to the large amount of money being borrowed in these cases.
5 Different Types of Personal Loans That Can be Obtained in India
The most common types of personal loans in India are:
1. Festival Loans
Leading banks in the country normally provide these loans at discounted rates during the festive season to drive up the amount of loans availed. These loans are typically small, and they can be as low as INR 5000. It’s a short-term loan and it is the best type of loan for individuals who need to borrow a small amount of money.
2. Consumer Durable Loans
This type of loan normally involves borrowing an amount no more than a couple of lakhs to purchase durable consumer products such as televisions, air conditioners, washing machines, and other products that cost a couple of lakhs. The loan may be either secured or unsecured.
A computer loan is a popular form of consumer durable loans. It may be secured or unsecured based on which bank you are borrowing from or the amount being borrowed. Typically, the nature of any collateral would be dependent on the type of electronic being purchased.
3. Gold Loans
Indians are famous for their love of gold and it is one of the easiest forms of loans that you can get. Whenever the gold rates are high, gold loans are probably the most popular type of loans. However, nowadays, gold loan companies have been experiencing a huge loss due to the fall in gold prices. Hence, gold loans are not very popular at this moment.
4. Marriage Loans
This is a type of personal loan that has surged in popularity in recent years. The amount borrowed for a marriage loan is normally dependent on a person’s financial background, age, credit worthiness, and the type of collateral offered. The interest rate is often determined by the current market rate and rates are typically higher during peak wedding season.
5. Vacation Loans
Numerous people across the country take loans for vacations inside or outside the country. The loan amount is typically dependent on the financial worthiness of an individual and in some cases, the individual’s travel destination.
The sum you can borrow as a personal loan will be dependent on the salary you draw or the income you have accrued. Personal loans will have higher interest rates than business and home loans as they are short-term loans and there is a greater degree of risk involved to the lender.
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