What is Loan and How to Take it?

Social Share

Need a loan urgently? Don’t take a loan sir! Take loan from us only! We will get the loan done in a pinch!

Many such telemarketing calls must have come to you too, which is really very irritating. But do you know what is loan after all? Why is it being given so easily now? What are the different types of loan? If all these questions are arising in your mind too, then you must read this article What is loan completely because it will help you to understand the loan better.

Whenever the thought of loan comes, then the picture of banks definitely emerges in the mind. And why not, in today’s time if you want a loan then you have to go to the banks only.

If the loan is understood in simple language, then it can be anything, but mainly money is understood in it, it is taken from another person, while returning it along with the interest along with the principal amount. have to return.

Simply put, it is such an act or work in which money, property or any other material goods are first provided to a needy person, whereas in the future, when that money is withdrawn from that person, then it is given back to the original money. Along with that he also has to return interest or interest and other finance charges. Only this amount is called loan amount. what is loan

Giving loan or lending means a person who has money is providing that money to another individual or entity. This is the most important primary financial product of any Bank or NBFC (Non-Banking Financial Company) that they offer to the common people.

By the way, everyone knows a little about loan, but today I thought why not you should be given complete information about what is loan and its types. Then without delay let’s start. what is loan

What is Loan?

Loan makes our life easy. In today’s time, direct connection of loan is done with Banks. This is probably because banks are the only financial institutions that provide you loans with interest. At the same time, they provide Loans to you soon in a very safe and secure way.

what is loan

If you have never taken a loan now then you might not know much about its importance.

Because when there is a great need of money, such as for the treatment of a major disease, for the marriage of children, for building your house or for the education of your children, then in such places loans stand as the only support. , Because it is very difficult to have such a huge amount with anyone, whereas be it a friend or a relative, such a huge amount cannot be asked from them. Now the only way left is to take a loan from the bank. what is loan

Loans are a very useful thing in times of need, whereas if you are unable to pay it back then it is the best thing to stay away from it.

What are the components of the loan?

There are mainly three components of the loan, which are –

  1. Principal or borrowed amount or amount taken in loan
  2. Rate of interest
  3. Loan duration or for when you have taken loan

Whenever you take a loan from someone, whether it is a bank, a financial institution or a person, then whatever amount you take from them is called Principal Amount or Loan amount. This is the principal amount which has to be brought back along with the interest.

Now let’s talk about Rate of Interest, this is the interest rate which gets added to the Principal amount as time passes. By the way, no one will give you money without interest, so whatever interest comes with your loan amount, in the end, when you go to return the loan, it is called the rate of interest amount. what is loan

Now know what is the duration of the loan, as if you take a loan from someone, then he will never promise to return it to you, but he keeps a time limit in front of you, within which you have to return his money. This is called loan duration.

loan Category Types?

Loans are broadly divided into two categories, one is secured and the other is unsecured.

Let us now know about the categories of what is Loans: –

  • Secured – A secured loan is a loan that is backed by collateral or security, that too in the form of assets such as property, gold, fixed deposits and PF (Provident Fund).

For example, if you have taken a home loan or an auto loan, then a lien is created on your property and you cannot sell it until you repay the entire loan amount and get your Can claim sole ownership of house and vehicle.

  • Unsecured – An unsecured loan is called a loan which is a type of personal loan and which does not require any collateral, security or guarantee and can be taken to meet your needs.

Bank or NBFC provide these loans to you without any security and together they only look at your CIBIL Score and personal track records.

Types of Loan?

Let us now understand that what type of loans do Indian people like to take more :-

  1. Home Loan – Unsecured
  2. Car Loan – Unsecured
  3. Education Loan – Secured
  4. Personal Loan – Secured
  5. Business Loan – Unsecured
  6. Gold Loan – Unsecured

Personal Loan

A Personal Loan is called that loan which is availed by individuals according to their needs. These loans are more useful when unexpected expenses stand in front of you. These loans are usually taken from a bank or a non-banking financial company (NBFC).

Education loan

Quality education is of utmost importance to all the students and for this they can go to any extent. As we know that the cost of education is increasing day by day. In such a situation, education loan is the only way left. what is loan

Education loan is called the loan that students apply to fulfill their educational requirements. Almost all banks and NBFCs offer education loan in India. what is loan

Home loan

Buying or building a house is a big dream of all Indians, while they definitely want to fulfill it. In such a situation, the entire accumulated capital is sacrificed for building a house, whereas sometimes it also falls short. In such a situation, if the dream is to be fulfilled, then we see the only way to take a home loan. what is loan

You can take a home loan to buy your new house, to renovate it, to buy land, etc.

Vehicle Loan

Everyone has a desire for a good car or vehicle, but we do not have enough money to buy it in a long time. While buying a vehicle is considered a matter of pride, it also has many advantages, such as it gives you the flexibility of transportation, also increases your convenience and functionality. what is loan?

In such a situation, if you want to take a car loan, then you can easily take it because there are many banks that offer car loans, that too with other benefits in attractive interest rates. On the other hand, if you do not want to repay together, then you can take the option of EMIs to repay the loan. what is loan?

Business Loan

Businesses require a lot of investment in order to run smoothly, to pay for their start-up expenditures or business extensions. For such works, companies have to take business loans for their financial assistance. what is loan?

It is actually a loan which has to be returned to the company after a specific tenure. You can take these business loans for many purposes like starting a new firm, for business expansion, to finance dealer and vendor, etc.

Gold Loan

Gold loan is a type of secured loan, whereas this loan is provided by banks in exchange of gold collateral.

Banks provide loans to borrowers for their needs, but in return they keep their gold jewelery and coins, whereas they return it when you return the amount taken. But there is not much trouble in taking it.what is loan?

TERM LOAN

Term loans are those loans which are taken mainly for business purposes and they also have to be returned within a specified time frame.

  1. It typically has a fixed interest rate, which has to be returned in a monthly or quarterly repayment schedule – and a maturity date is also set in advance. This is a secured type of loan. what is loan?
  1. A secured term loan usually has a lower interest rate as compared to an unsecured one.

Classification of Term Loans

Long Term (<3years)
Medium Term (1-3 years)
Short Term (1 year)

Open-ended loans

These are called those loans that you can take again and again. Credit cards and lines of credit are the most common types of open-ended loans. In both these types of loans, you have a credit limit against which you can purchase.

Every time you make a purchase, your available credit decreases. This is because the credit limit is fixed. Whereas as you make payments, your credit limit also increases so that you can take the same credit again and again. what is loan?

Closed-ended loans

These are called those loans which if you take once, then you are able to take it again only after repaying it. Here too, as you keep repaying the loan amount, your loan balance also increases, but in this you cannot take more loans. Rather, you can take a loan again only after repaying the entire loan amount. what is loan?

If I talk about the example of closed-ended loans, then it includes mortgage loans, auto loans, and student or education loans.

What are some important concepts related to loan: –

  • Income: The main concern of Lenders (who provide loans) is your repayment capacity. In such a situation, fulfilling the income requirement of the bank is the most important thing for any loan applicant. Therefore, the higher the income, the easier it will be to apply for bigger loans, that too for a longer period.
  • Age: A person who still has more working-age left on his side (I am not talking about new job seekers) will find it easier to get a long-term loan approved than an older person or a of fresher. what is loan?
  • Down payment: This is the share of the loan applicant towards the payment for which he has applied for the loan. For example, if you have bought a car for 10 lakhs and the bank has promised to give you Rs.8 lakhs, while the remaining Rs.2 lakhs is called Down Payment. This is paid by you.
  • Tenure: This is called the time limit that is given to you to complete the loan. If you are not able to repay it within that time limit, then you have to fine for it and your colletral things can also be confiscated.
  • Interest: This is the amount of interest that has to be provided to the person taking the loan along with the principal amount. Interest Rates vary from one loan to another. And sometimes from one person to another because it also depends on their credit scores.
  • Equated Monthly Installments (EMI): This is called the monthly repayment amount that the borrowers have to return to the bank within a predetermined time limit. In an EMI, both the principal interest is kept together and it is divided equally in that time frame.

Benefits of loan

Let us know about the features and benefits of loans.

Having Financial Flexibility: Loans provide you financial flexibility. It provides you financial help in your time of need. While taking a loan, it also gives you financial freedom to some extent and also handles your daily expenses properly, while it does not disturb your planned budget. what is loan?

Easy availability: All types of loans are mostly approved within 48 hours, provided that you have already submitted all the necessary documents. That’s why they can be easily obtained.

Getting the required amount: Based on your income and financial history, you get the money you need.

Having Convenient Tenure: At the time of taking loans, you can choose within what time frame you can repay the loan. In most of the time, you get loans from 12 months to 60 months. what is loan?

Benefits in Tax Benefits: According to the Income Tax Act of 1961, you get the facility of tax benefits in almost all types of loans.

What are the main reasons for taking a loan?

Let us now know what are the main reasons for taking loans.

To fulfill Life Goals: When you want your life goals to be fulfilled and for this you need some financial assistance, then you are in great need of Loans.

Due to immediate financial requirements: We do not even know when what will happen to someone, so at such a time you can apply for a loan if there is a financial emergency. what is loan?

To do any financial arrangement properly: If any such incident happens in front of you, about which you do not know anything, then you can apply for a loan at such a time, because you do not want that any Whatever be the kind of obstruction, things should go smoothly there.

What are the things that need to be kept in mind before applying for the loan?

Taking a loan is an easy thing, but before that you must pay attention to some things because for this you may have to repent later. Let us pay attention to some such aspects.

Credit score: Before applying for loan, definitely check your credit history once. This credit history is a type of record that shows the investment made by you, loans taken and repayment record already. This will show any bank that how is your previous track record and whether you should give loan properly or not. By the way, a good credit score is considered to be 750 or above.

Rate of Interest: Must check the loan interest rate once before applying for the loan. Because loans that require a collateral have lower interest rates as compared to loans that do not require them. what is loan?

Processing fee and other charges: If you apply for the loan and you miss the payment deadlines of your loan, then you have to pay a processing and penalty fee. These fees and charges depend on the loan amount and the bank.

Research to get the best rate for your loan: Research and compare with different banks; From NBFCs so that you can know about best interest rates, EMI, tenure and other charges.

Eligibility to take loan

ParticularsSalariedSelf-Employed
Age(Min-Max)18 years to 58 years28 years to 65 years
IncomeRs.25000Minimum turnover to Rs.40 lakhs
CIBIL ScoreAbove 725Above 750
  • All these data are just indicative in nature

Documents for Loan Application

SalariedSelf-Employed
Application form with photographApplication form with photograph
Identity and residence proofIdentity and residence proof
Last 6 months bank statementsLast 6 months bank statements
Processing fee chequeProcessing fee cheque
Latest Salary SlipProof of Business
Form 16Business Profile and Previous 3 years Income Tax returns (self and business)Previous 3 years Profit/Loss and Balance Sheet

What is Loan EMI Calculator?

Loan EMI Calculator is a handy tool which you use to calculate monthly payable amount and interest.

To calculate EMI of your loan amount, you just have to enter the values ​​of some things like principal Amount (P), Time duration (N), and Rate of interest (R).

How to Take loan

It is very easy to apply loan in the bank. But before applying, you must know your financial situation, because in the end you also have to repay that loan amount. what is loan?

Whatever your need, the decision to loan the money should be the last one. If you want, you can apply online and follow the steps given by them, while you can also apply offline, for which you have to go to the offical branch and talk to the manager and understand the loan correctly. what is loan?

What is the 4 C’s of Credit of Loan and why it is important to know it?

Character

This means the complete financial history of the borrower. Means how is the person taking the loan, how is his previous behavior etc. Credit score is used to see this thing. what is loan?

Capacity

This means that the ability of the business so that it can generate that much revenue so that the loan amount can be repaid. In other words, capacity shows the ability of the borrower (who takes the loan) to repay the loan. If the bank gives loan to a new business, then it is the most risky for them. what is loan?

Capital

This means the capital assets of the business. Capital assets include the company’s machinery and equipment, along with product inventory, store and restaurant fixtures. Banks always take special care of this thing that how is the capital of the company because if the loan is not repaid then they have to sell these assets, whereas if it cannot complete the loan amount then it is the loss of the banks.

Collateral

This means the cash and assets that a business owner pledges to secure his loan. Even if your credit score is good, while you are generating good income, even then banks want you to keep all your assets with the bank on the basis of security, so that the loss of the bank is reduced if you cannot repay the loan. what is loan?

Can Mutual Funds be used as collateral for loans?

Borrowers can now easily take loans using Mutual Funds as collateral. If your income is less than required, then you can use mutual funds.

In this, you just have to fill a form along with the rest of the documents, whereas according to the amount of your mutual fund, you get the loan. what is loan?


Social Share

Leave a Comment

Your email address will not be published. Required fields are marked *