Personal loans can provide financial relief when you’re struggling to make ends meet or have a large purchase you want to make. When looking for a loan, it’s important to understand the types of personal loans available to you and their particular benefits and drawbacks. Oftentimes, people will choose the wrong personal loan for their needs because they’re not aware of the pros and cons. To make sure you don’t make this mistake, we have a list of the 5 types of personal loans you can apply for in India.
1. Home Loan
A home loan takes into account your income minus your living expenses and then considers your eligibility on the remaining balance, which will then be offered as a loan amount. Banks usually consider about 40% of your income as living expenses. So if you make Rs 70,000 each month and spend Rs 30,000 on living expenses, and then have to spend about Rs 20,000 on other loans, such as a car loan, then your home loan eligibility will be calculated on the remaining Rs 20,000.
Personal loan interest rates can vary on a home loan, so it’s important to do some research on what you can afford and will be comfortable with before taking on the loan.
2. Gold loan
A gold loan is a loan that is taken out through a bank or financing company that requires you to put up gold jewelry or coins as collateral. In the case of financing companies, only gold jewelry is accepted.
The gold pledged needs to have a purity of 18-24 carats and the loan is given after the gold is examined and documents are reviewed to confirm the quality of the gold. These loans are offered in the form of cash, demand drafts, or an account transfer. This type of personal loan is quite popular for those who need money in a hurry, since it doesn’t take long to process them.
3. Personal loan
A personal loan is provided by a bank and usually has flexible tenure. They often require no security or collateral, however, the interest rates on personal loans can be quite high. In fact, personal loans are the most lucrative form of loans a bank offers, since the interest rates can be as high as 24%, depending on your credit and what bank you’re working with.
4. Overdraft loan
An overdraft loan allows you to take money out against your current bank account. You can set up an overdraft account in a couple of hours or within one business day, which makes it a quick and simple way to get access to cash. Based on which bank you’re with, there is an upper limit to what you can borrow. You can repay an overdraft loan within your own timeframe, though interest rates on the cash borrowed can be high.
5. Property loan
A property loan is quite similar to a personal loan in interest rates and structure, however, unlike a personal loan a property loan is secured against the property you offer up. This could be your home or land you own. If you default on the loan, the property can be seized by the bank.
