TYPES OF LOAN AND

FEATURES
SUBMITTED BY: SIMRAN
182
5.6 (B)
SUBMITTED TO: MISS NISHA
 LOAN

We may not always have the money we require to do

certain things or to buy certain things. In such
situations, individuals and businesses/firms/institutions
go for the option of borrowing money from lenders. 

When a lender gives money to an individual or entity

with a certain guarantee or based on trust that the
recipient will repay the borrowed money with certain
added benefits, such as an interest rate, the process is
called lending or taking a loan.
TYPES OF LOAN
Based on the Security Provided

 Secured Loans
These loans require the borrower to pledge collateral for the money
being borrowed. In case the borrower is unable to repay the loan, the
bank reserves the right to utilise the pledged collateral to recover the
pending payment.

 Unsecured Loans
Unsecured loans are those that do not require any collateral for loan
disbursement. The bank analyses the past relationship with the
borrower, the credit score, and other factors to determine whether the
loan should be given or not.
Based on the Purpose

• Education Loan
Education loans are financing instruments that aid the borrower
pursue education. The course can either be an undergraduate degree,
a postgraduate degree, or any other diploma/certification course from
a reputed institution/university. You must have the admission pass
provided by the institution to get the financing.

• Personal Loan
Whenever there is a liquidity issue, you can go for a personal loan. The
purpose of taking a personal loan can be anything from repaying an
old debt, going on vacation, funding for the downpayment of a
house/car, and medical emergency to purchasing big-ticket furniture
or gadgets.
• Vehicle Loan

Vehicle loans finance the purchase of two-wheeler and four-wheeler vehicles.

Further, the four-wheeled vehicle can be a new one or a used one. Based on the
on-road price of the vehicle, the loan amount will be determined by the lender.
You may have to get ready with a downpayment to get the vehicle as the loan
rarely provides 100% financing.

• Home Loan

Home loans are dedicated to receiving funds in order to purchase a house/flat,

construct a house, renovate/repair an existing house, or purchase a plot for the
construction of a house/flats. In this case, the property will be held by the lender
and the ownership will be transferred to the rightful owner upon completion of
repayments.
Based on the Pledged Assets

• Gold Loan

Many financiers and lenders offer cash when the borrower

pledges physical gold, may it be jewellery or gold
bars/coins. The lender weighs the gold and calculates the
amount offered based on several checks of purity and other
things. The money can be utilised for any purpose. 

The loan must be repaid in monthly instalments so the loan

can be cleared by the end of the tenure and the gold can be
taken back to custody by the borrower. If the borrower fails
to make the repayments on time, the lender reserves the
right to take over the gold to recover the losses.
• Loan Against Assets
Similar to pledging gold, individuals and businesses
pledge property, insurance policies, FD certificates,
mutual funds, shares, bonds, and other assets in
order to borrow money.

The borrower needs to make repayments on time so

that he/she can get custody of the pledged assets at
the end of the tenure. Failing to do so, the lender can
sell the assets to recover the defaulted money.
FEATURES OF LOAN
There are several types of loans categorised based on
various factors.
You can choose the type of loan you wish to take based
on your requirement and eligibility.
The lender will be the ultimate power to decide the
loan amount they wish to offer to you based on several
factors, such as repayment capacity, income, and
others.
A repayment tenure and interest rate will be
associated with every loan.
The bank may apply several fees and charges to every
loan.
Many lenders provide instant loans that take a few
minutes to few hours to get disbursed.
The interest rate is determined by the lender based on
the Reserve Bank of India’s guidance.
The lender determines the requirement for security.
A third-party guarantee can be used instead of
security in some cases.
The loan repayments must be made in equated
monthly instalments over the pre-determined loan
tenure.
There may or may not be the option for full/part
prepayment.
Some loan types and lenders may levy a penalty for
prepayment of loans.
COMPONENTS
A loan has three components – principal or the
borrowed amount, rate of interest and tenure or
duration for which the loan is availed. 

Most of us prefer borrowing money from a bank or a

trusted non-banking financing company (NBFC) as
they are bound to the government policies and are
trustworthy. Lending is one of the primary financial
products of any bank or NBFC (Non-Banking Financial
Company) offers.