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Is it okay to take a loan? People often get scared by the idea of taking loans. They get confused by the thought of safety in loans. People often get terrible about what loans type to choose. There are several loan types available. In this article, we will learn about these types. But first, we need to know what a loan is.
What is Loan?
To put it in simple words, it is a good idea to save money before making a big spender mark. But it can not happen that someone is financially always ready to make a big spend. If any immediate crises occur, such as college bills, medical emergencies, or some unpredicted situation, we can borrow some money for those scenes. Now, borrowing money from a bank or from an agency with a promise to return it on a fixed period or tenure is familiar as Loan.
How many loan types are there?
There are various loan types available. But these types mainly depend on two particular factors.
- Secured loans
- Unsecured loans
Let us discuss these loan types in detail.
Secured Loans
In this type, one has to pledge property as collateral to the lender. In this way, if someone fails to repay the money on time, the lender would have something to get their money back in return.
The types of secured loans are as follows.
Home Loan
During this loan time, one will be able to get some money, which they can use to buy or build a home. Even Home loans have some different types they are as follows. A) Land purchase loan helps one to purchase land for their dream home. B) Home construction loans help one with a lump of money to construct their dream home. C) Top Up Loan can help you with money that you can use to update or renew your existing home.
Loan against Insurance policy
Yes, you are hearing it right. One can get a loan against insurance policies. But it is to mention that not all insurance plans can give you the benefit of taking loans. The insurance policies with maturity value, such as endowment and moneyback policies, can only make you get some help in this field. But on a highlighted part, we should also know that endowment and moneyback policies should reach the surrender value to help you in loans.
Gold Loan
Gold loan generally has short time repay tenor compared to a home loan. One of people’s most prized possessions nowadays is gold, particularly in India. In this loan type, one has to pledge gold to get the needed amount. Gold loan is basically for immediate needs.
Loans against Fixed Deposit
Undoubtedly, fixed deposits are your bad day friend, which ensures to come back to you. Well, you can avail the benefits of getting loans against your fixed deposit. The only thing one needs to remember is that the Loan’s tenor should not be more than the FD’s tenor.
Loans against Property
It is a well-known form of secured loans types. One can get a lump of money in the form of a loan with the help of commercial, industrial, or residential property. People use this type of Loan specifically for their children’s marriage or education.
Unsecured Loans
In Unsecured Loans, there is no collateral. But one should know that in this type, the interest rates are a little higher, as there is no collateral. Some of these unsecured loan types are as follows.
Personal Loan
People use personal loans for their own needs. This type of Loan asks for repayment between 24-48 months. Some of these examples are as follows.
- Medical Treatment
- Wedding or big family ceremony
- Travel or Vacation
- Children’s higher education
- Home renovation projects.
Short-term Business Loans
This Loan can help small-term businesses with their expenses, organizational or daily. These are a few examples of these loans.
- Working capital loans
- Loans for traders
- Loans for manufacturers
- Loans for Women entrepreneurs
Auto/Vehicle Loans
If you are the one who wants to take a ride in their dream vehicle but can not because of the financial crisis. Then you are getting surprised by this type of Loan. A vehicle Loan helps you to purchase your dream ride or a used one.
Education Loans
Hello! Students, you are in the right place if you are someone who wants to pursue their dream career by achieving their highest academic goals. Education Loans help to follow the path to acquire your higher degrees by paying the basic college fees, accommodation and exam fees, etc.
There are some other loans available. These loan types are as follows.
- Flexi Loans. Flexi means flexibility. This type of Loan gives freedom to get funds from your approved amount anytime you want. One can pay the interest only when he uses this amount.
- Pawnshop Loans – Pawnshop Loans are expensive and generally ask for quick repayment.
- Boat Loans – This is generally the type of Loan you can take if you want to purchase any boat of your own.
- Recreational Vehicle Loans – Recreational Vehicle Loans or RV loans are generally lifestyle loans. One can phrase it as both secured or unsecured loans. This type of loan works as an auto or vehicle loan.
- Pool Loans – You can avail of this Loan if you want to add a pool to your property. Recreational Vehicle Loans and pool Loans are examples of lifestyle loans.
- Mortgage Loans – This type of Loan helps one to purchase a home. Generally speaking, Mortgage Loans are government-backed. It is accessible to a variety of consumers. USDA for rural and low-income folks, FHA for low to moderate-income, and VA for those with active duty jobs.
- Family Loans – And last but not least, here comes family loans. It is an informal system. If one can not find any bank or lender, one can ask a family member for some money. It will not require you any credit, which the bank or lender would accomplish.
So, these are the basic information for loans and its types. Each loan’s type depends on the user’s necessity. We hope you have gained some knowledge through this article.
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