A loan is money that one individual, organization, or institution lends to another individual, organization, or institution for a specific period. The borrower takes the loan intending to return the actual principal with interest.

Important elements of a Loan:

  • Principal Amount – The actual amount of money being borrowed.
  • Interest Rate – The annual percentage rate a lender charges on a loan.
  • EMI – Equated Monthly Installment is the monthly payment one makes to repay the loan.

Broadly, Loans are categorized into secured and unsecured loans:

Secured loans

These types of loans are being secured by some asset or property. If the borrower defaults on his/her loan, in that situation, the bank will become the owner of that asset or property. A mortgage is the most popular type of secured loan.

Unsecured loans

Other than secured loans, in unsecured loans, the borrower does not keep any of his/her assets or property as collateral. These types of loans can play an essential tool in the business world for short-term funds. A personal loan is the most common example of an unsecured loan.

Most common types of loans in India:

  • Home Loan
  • Mortgage Loan
  • Personal Loan
  • Vehicle Loan
  • Business Loan
  • Gold Loan
  • Education Loan

Important Factors which concerns a Loan:

  • Age of the borrower
  • Down Payment
  • Income
  • Tenure
  • Interest
  • EMI
  • A person who can give a guarantee (In case of few unsecured loans)
cookie image

By clicking “Accept", you consent to our website's use of cookies to give you the most relevant experience by remembering your preferences and repeat visits. You may visit "cookie policy” to know more about cookies we use.