Loan and its Type

 Loan and its Type

A loan is an amount of money that any individual or company borrows from banks or another financial institute for their financial work. It is money, property, or another kind of thing given to another person in exchange for repayment of a loan in the future with interest. It includes two parties, the lender- who gives a loan, and the borrower- who takes a loan. The lender can be any corporation, financial institution, or government. This process of exchanging money includes a written agreement with the exchange of terms and conditions about interest, financial charges, repayment date, collateral, etc., between two parties.

Process of loan

When someone needs money, then they can apply for a loan from a bank, government, or corporation. The borrower is required to provide some information like the reason for the loan, their financial history, and other important information. The lender reviews the information to check if the borrower is eligible to get the loan and see if the loan can be paid back. After reviewing the information, the lander may approve the application for a loan or may be denied. If the loan is approved, they both sign an agreement regarding the loan to complete the process.

There are different types of a loan based on two factors and one can apply for any loan according to their requirements:

1. Secured loan

 It is a type of loan which required collateral, where you have to provide security of the money you are borrowing to the lender. If you cannot repay the loan the lender has some means to get the money back.

2. Unsecured loan

 It is a type of loan which doesn’t require collateral. The lender gives money based on your credit score and history. But this loan has a high-interest rate than a secured loan due to a lack of collateral.

  • Types of Secured loans

S. No

Types of loan



Home loan

The is taken to buy or build the home.

There are different types of home loans:

Land purchase loan, home construction loan, home loan balance transfer, Top up loan


Loan against Property

This is taken to against any residential, commercial, or industrial property. The amount of the loan is based on the value of the property. This loan can be used to satisfy personal goals and business expansions.


Gold loan

You can get the loan by pledging gold jewellery as collateral. This loan is generally used for short-term needs.


Loan against fixed deposit

You can get the loan on your fixed deposit. The amount of the loan depends on the value of fixed deposit or may depend on the lender.

  • Types of Unsecured loans

S. No

Types of loan


1     1.

Personal loan

This loan is used for personal use. This loan offers instant liquidity but it has a higher interest rate due to insecurity. Your good credit score and secured income help you to get this loan.


Short-term Business loan

This loan is can be used to fulfil various expansions of the organization.


Educational loan

This loan is useful if someone wants to aspire for higher education from a reputed institution. In this loan, the student is the primary borrower, and the parents or spouse are co-applicants. The amount of the loan can be repaid after completion of the course.


Vehicle loan

This loan is helpful to buy your dream vehicle. Your financial history plays a great role in determining the amount of the loan.

Thus, Loan can be beneficial to maintain you expenses only if you can repay and use it in correct manner.

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