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Learn Loans Different Types of Loans Offered by Banks In India
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Loans are a common way of borrowing money from banks for various purposes. However, not all
loans are the same. Banks offer different types of loans with different features, benefits, and
requirements.
However, navigating the world of bank loans can be like figuring out a puzzle. Some loans use
collateral, such as gold or property, as security, while others are unsecured. No collateral is needed
to get an unsecured loan.
In this blog, we will explore some of the most common types of loans offered by banks, such as
personal loans, car loans, home loans, education loans, and business loans. We will also discuss
how to choose the best loan for your needs and how to manage your loan repayments effectively.
Banks offer a wide array of loans, and it s like having a menu of financial choices. There are two
main categories: secured and unsecured loans.
Secured loans are loans that require you to pledge an asset as collateral. When you opt for such a
loan, you essentially offer something valuable as collateral, like your home or car. This collateral
acts as a safety net for the bank. If you can t repay the loan, the lender can take over your asset.
Secured loans usually have lower interest rates and higher borrowing limits than unsecured loans,
but they also carry the risk of losing your assets. Some examples include home loans, auto loans,
etc.
Unsecured loans are like a financial handshake based on trust. Here, you don t need to put up any
collateral. The lender assesses your credit score and income to determine your eligibility. Unsecured
loans usually have higher interest rates and lower borrowing limits than secured loans, but they do
not put your assets at risk.Credit cards and personal loans are classic examples of unsecured loans.
For EMI Calculation use ET Money s Home Loan EMI Calculator.
To Calculate your EMI use ET Money s Car Loan EMI Calculator.
Unsecured loans don t require the borrower to provide any security or collateral. These loans are
based on the borrower s creditworthiness, ability to repay the loan, and income. Lenders face more
risk with unsecured loans than secured loans, so they offer higher interest rates.
Here are some of the common types of unsecured loans available in India.
Different loans have different requirements for eligibility. Lenders typically consider variables like
credit score, income, age, employment status, and loan purpose. Here are the eligibility criteria
depending on the type of loan.
Secured Loans
Home Loan
Eligibility for a home loan requires Indian citizenship, residence, and a monthly income of at least
10,000.
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.
Gold Loan
Individuals who own gold jewellery or specially minted gold coins sold by banks.
Age of the applicant: 18 years and aboveTotal carats of gold that can be pledged: 18 carats or
above
Maximum loan amount: At the discretion of the bank
Tenure: As per the lender s terms and conditions.
Vehicle Loan
Minimum Age of the Applicant: 18 years
Maximum Age of the Applicant: 60 years for salaried applicants and 65 years for self-employed
applicants
Minimum Annual Income: Rs 3 lakh
Car Model: Any approved car model
Type of Employment: Salaried or self-employed
Duration of Stay in Current Residence: A minimum of 1 year.Maximum loan amount: Usually up to
85% of the vehicle s ex-showroom price.
Loan against Property
Minimum Age limit: 21 years
Maximum Age limit: 65 years 70 years
Employment Status: Salaried or self-employed individual
Minimum Income: Rs 25,000 per month or Rs 3 lakh p.a.
Work Experience: Minimum experience of 1-5 years
Maximum Loan Amount: Up to Rs.25 crore
Credit Score: CIBIL score of 750 or more
Repayment Tenure: 15-20 years (Maximum)
Loan against Security
Should be a resident of India
Age: Minimum 21 years of age
Employment Status: Salaried or self-employed individual.
The bank should approve the security against which you are availing the loan
Loan against PF/EPF
Medical Purposes: Employees shares can be withdrawn with interest or six times the monthly salary
(whichever is lower). This EPF withdrawal is applicable for medical treatments of self, spouse,
children, and parents.
Repaying Home Loan: After three years of EPF membership, you can withdraw up to 90% of your
EPF corpus to repay a home loan.
Wedding: Withdraw 50% of your employee s contribution with interest for a wedding after seven
years of EPF membership.
House Renovation/Reconstruction: After five years, you can withdraw an amount equal to 12 times
your monthly salary for house renovation or reconstruction.
Purchase/Construction of New House: After five years, you can withdraw either 24 times or 36 times
your monthly salary for purchasing or constructing a new house.
Retirement: You can withdraw the entire EPF balance after turning 58, and 90% of it is accessible
after reaching 54.
Unemployment: If you re unemployed for over a month, you can withdraw 75% of your EPF balance.
The remaining 25% can also be withdrawn for unemployment exceeding two months.
Unsecured Loan
Personal Loan
Nature of employment: Working for a multinational corporation, a public limited company, or a
private limited company
Age: 21 years to 60 years
Minimum monthly income: Those who earn a minimum of 25,000 net income per month
Work experience: Individuals with at least two years of work experience, with at least one year with
the current employer
Credit Card Loan
To qualify for this loan, you must have a credit card.
You must have a good credit history.
Education loan
The applicant for the loan must be a resident of India.
They must have received confirmation of admission to a recognised educational institute in India or
abroad.
The candidate must be between 18 and 35 years old during the loan application process.
They must be pursuing a graduate/postgraduate degree or a postgraduate diploma.
A solid academic record speeds up loan approval.
Short-term Business loan
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
Maintain a credit score of 685 or higher.
Also Read: Difference Between Secured and Unsecured Loan
Banks offer diverse loans to meet various financial needs. Whether it s a personal goal, education,
or starting a business, understanding the available loan options can help individuals make informed
financial decisions.
Generally, secured loans are cheaper than unsecured loans because they have lower interest rates
and more extended repayment periods. However, secured loans also require collateral, which
means you risk losing your assets if you default.
Short-term loans are unsecured loans with a repayment period of less than one year, such as
payday loans, personal loans, and credit card loans.
There are many types of loans, such as business loans, personal loans, home loans, car loans,
education loans, gold loans, and loans against property.
Self-employed individuals can choose from business loans, personal loans, gold loans, and loans
against property based on their income and business plan.
Salaried individuals can choose from personal loans, home loans, car loans, education loans, and
credit card loans based on their income and financial goals. However, the best loan type may vary
based on individual needs, such as home loans for purchasing property.
Government employees can choose from personal loans, home loans, car loans, education loans,
and special schemes offered by banks and financial institutions. However, the best loan type may
vary based on individual needs, such as vehicle loans for buying a car.
There are various government loan schemes, such as Pradhan Mantri Mudra Yojana (PMMY) and
Pradhan Mantri Awas Yojana (PMAY).
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Banayantree Services Limited, Non-Individual SEBI Registered Investment Advisers, RIA No.
INA100006898, Validity January 09, 2017 - Perpetual
Registered Address: Express Building, 9-10, Bahadurshah Zafar Marg, New Delhi - 110002
Corporate Office: Plot No. 391, Udyog Vihar, Phase-III, Gurugram, Haryana, 122016
SEBI Regional office address: NBCC Complex, Office Tower-1, 8th Floor, Plate B, East Kidwai
Nagar, New Delhi - 110023
