What Is a Loan?

The term loan refers to a type of credit vehicle in which a sum of money is lent to another party in exchange for future repayment of the value or principal amount. In many cases, the lender also adds interest and/or finance charges to the principal value which the borrower must repay in addition to the principal balance. Loans may be for a specific, one-time amount, or they may be available as an open-ended line of credit up to a specified limit. Loans come in many different forms including secured, unsecured, commercial, and personal loans.

KEY TAKEAWAYS

• A loan is when money is given to another party in exchange for repayment of the loan principal amount plus interest.
• Loan terms are agreed to by each party before any money is advanced.
• A loan may be secured by collateral such as a mortgage or it may be unsecured such as a credit card.
• Revolving loans or lines can be spent, repaid, and spent again, while term loans are fixed-rate, fixed-payment loans.

Financial institutions offer home loans for the purchase of the property. You can also buy/construct/renovate/extend your house with this money and repay it gradually within the chosen time period. Home loans are secured against the property, and if you fail to repay, the lender can take over the property from you and sell it to recover the dues.The eligibility for a home loan depends on an applicant’s income, credit history, property value and location. Based on these factors, the maximum loan amount is calculated.

A car is a dream that many of us wish to achieve one day, right. In the present scenario, buying a car has become easier as more and more lenders are coming up with a slew of easy and attractive financing options to appeal the customers. Unlike earlier when only a few elite class used to have the privilege of owning a car, today even an individual with a salary of say Rs. 15,000-20,000 can also buy the 4-wheeler. This has been made possible due to the repayment of the loan in the form of equated monthly installments (EMIs), which constitute a portion of interest and principal payable each month from your pocket. Not only new cars, but even a used vehicle can also be bought on a loan. However, the repayment tenure can vary in each of the cases. The maximum loan tenure for new cars is seven years, while for used cars it is 5 years. Any individual, be it salaried, self-employed businessmen or professionals with a regular source of income can avail a car loan from non-banking finance companies (NBFCs) across India.

Education Loan is offered to the students for their higher education. And the purpose of the loan is quite clear i.e. to meet the educational needs such as admission fees, purchase of books, and even travel expenses associated with overseas studies. Whether the student has a dream to study abroad or India, it can be true with the help of education loans. To find out the best loans among the wide range of schemes, you just have to compare their rate of interest. It is because the interest rate greatly impacts your loan journey. But the focus must not be solely on the interest rate. You also need to see which offers you the adequate loan, plus collateral norms and other stuff. Let’s read more about education loans provided by lenders in India.

An owned property can leverage you with ample sum of money that can be channelized to serve different purposes and it can act as a financial saviour in times of crisis. Loan against Property (LAP) is the financial product and type of secured loan that enables the borrower to fetch market value of the property from financial institute and deploy the amount to meet different goals.