Loans can be a real lifesaver when you need some extra cash, but with so many different types out there, it can be overwhelming to decide which one to choose.  

That’s where this blog comes in! We’ll break down the most common types of loans in India so you can make an informed decision. 

Different types of Loans

1. Home Loan 

A home loan is a great option if you want to buy a house, flat or a plot. 

Depending on the provider, you can choose a repayment period of up to 30 years. Since it’s a secure loan, the interest rate is on the lower end, and starts as low as 6.5% in India. 

An additional benefit is that the interest paid on a home loan is also eligible for tax deduction.  

2. Loan against property 

Also called mortgage loans, you pledge your residential or commercial property to avail this loan. This has many benefits such as low-interest rates, long repayment tenures and the loan amount can be used for anything you want. 

3. Loan against insurance policies 

You can avail loans against policies which have maturity benefits. However, you could only get it if the policy has acquired a surrender value. 

The surrender value is the money a policyholder gets when they exit the policy before its maturity date.  

4. Gold Loan 

Pledging gold to borrow money is not a new concept for us. Based on your gold’s weight, purity and its present market value, the lender decides an amount you could borrow against it.  

Out of all the secured loans, people prefer gold loans for short-term money needs. 

5. Loan against securities  

This is a great alternative for those who think of selling their shares, mutual funds, bonds, etc when they need money. Instead, you can get loans by pledging these securities. 

6. Loan against fixed deposits 

There are two ways to avail a loan against fixed deposits (FD): 

i. Take a loan against FD – Like any other secure loan, here you pledge your FD and avail the loan. 

ii. Ask the bank to issue an overdraft (OD) – In this, you can withdraw more money than your account balance. Usually, banks charge 1-2% higher than FD interest rates to issue overdrafts.   

7. Vehicle Loans (Car loans & Two-wheeler loans) 

You can use this to buy the two-wheeler or four-wheeler of your dreams. Vehicle loans could be secured as well as unsecured.  

In case of secured loans, borrowers usually pledge the vehicle itself as collateral.  In this, the loan company pays the money directly to the vehicle company on your behalf and when you repay the loan, the vehicle registration is transferred to your name. 

8. Personal Loan 

As the name suggests, you could use a personal loan for anything you want, like medical, travel, vacation, wedding, etc. Compared to other types of loans, a personal loan requires minimal documentation.   

For example, you can quickly get instant personal loans from Zype app without any hassles. You can get loan approval up to ₹5,00,000 in three easy steps. After choosing your desired amount and a convenient EMI option, you can transfer money in your account in a single click. Click here to download the Zype app. 

9. Short-term Business Loan 

Also known as small business loan, the goal of this loan is to help businesses who have a short-term money need. So, if you need money for things like day-to-day operations, business expansion, etc, short-term business loans could come handy for you. 

10. Flexi loan 

Under this, you can borrow money up to a certain limit in the form of credit line facility. You are charged only on the amount borrowed. This way, you can borrow the amount you need without having to pay interest on a higher amount. 

11. Payday Loan 

This loan is for salaried professionals facing a cash crunch. They usually repay the loan once they receive their next pay cheque. Payday loans could be quite expensive as they have high interest rate.  

12. Cash Advance

This service is given by credit card companies. You can withdraw cash using your credit card anytime through ATMs or through banks during office hours.  

We recommend you use this only in extreme situations as this is a very expensive way of borrowing money. 

13. Agriculture Loan

A farmer can avail agriculture loans for farming related needs, like buying equipment, seeds, fertilisers, pesticides, etc. As per RBI guidelines, crop loans up to INR 1 lakh require no security.  

14. Education Loan 

Also known as student loan, this could be availed for any kind of educational requirement, like school, colleges, part-time or full-time courses, vocational courses, etc. The student is supposed to start repaying the EMIs after completion of the course.  

In Conclusion 

Understanding the different types of loans would help you to choose the right loan type for your money related needs.