Loan and Finance

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Overview

A loan is when money is given to another party in exchange for repayment of loan principal amount plus interest. Loan terms are agreed to by each party before any money is advanced. It may be secured by collateral such as a mortgage or it may be unsecured such as a credit card.

Types of Loan

Secured Loan

It is protected by an asset. The item purchased, such as a home or a car, can be used as collateral. The lender will hold the deed or title until loan is paid in full. Other items can be used to back a loan too. This includes stocks, bonds, or personal property.

  • Home Loan
  • Loan against Property (LAP)
  • Loan against insurance Policies
  • Gold Loans
  • Loans against mutual funds & shares
  • Loan against Fixed Deposit
Eligiblity criteria for Secured Loan
  • Take a loan in India; applicant must be an Indian resident.
  • Usually a requirement for a certain minimum amount of annual income – usually Rs. 3 Lacs.
  • Applicants can be Salaried, Self – employed, professionals or business institutions.
  • It may also be granted to HUFs and Farmers.
  • Applicant must possess assets of sufficient value to match the loan amount. This asset will then be offered as collateral against loan.

Unsecured loan

It is the reverse of secured loans. They include things like credit cards, students loans. Lenders take more of a risk by this loan, because there is no asset to recover in case of default. This is why the interest rate is higher. If you are turned down for unsecured credit, you may still be able to obtain secured loans. But you must have something of value that can be used as collateral.

  • Personal loan
  • Short – term business loan
  • Education loan
  • Vehicle loans
Eligiblity criteria for Unsecured Loan
  • Applicant should be in a stable job. Regular employment record plays a vital role in making a customer eligible for unsecured loan.
  • Salaried individuals with a minimum 2 years of professional service or a self – employed person within 5 years of earning tenure.
  • Age of the applicant should be above 21 years and below 60 years for salaried borrowers, and between 25 and 65 years for self – employed borrowers.
  • Credit history of customers is also taken into account and is instrumental in determining eligibility, rate interest, and loan amount.

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