Loans are a way of funding a necessary expenditure using some external help. Banks offer many types of loans, depending on your needs and what kind of loan you’re looking for.
Different types of loans are :
- Personal loans
- Auto loans
- Student loans
- Home equity loans
- Mortgage loans
- Credit builder loans
- Debt consolidation loans
- Payday loans
- Small business loans
- Title loans
Now let us understand some significant types of loans in depth.
What is a personal loan?
A personal loan is a loan to help an individual meet fund requirements. Personal loan aids in the financial requirements of personal nature. People usually choose a personal loan to meet their instant requirements. They may opt for a personal loan to fund their marriage expenses, travelling expenses, home renovation, medical expenses, sudden losses, etc. personal loans are used to finance immediate emergencies. Anyone can go and easily acquire a personal loan for any reason. The personal loan doesn’t require any security or collateral; therefore, it is easy to secure a personal loan.
Securing a personal loan can be an easy task if all your documents are right and you meet the eligibility criteria. Banks look for credit history, employment status, financial discipline and other basic details before sanctioning a loan. It’s a quick and a smooth process but the interest rate is slightly high.
Documents required for a personal loan are:
- Proof of identity
- Proof of residence
- Proof of ownership of the residence
- Proof of income
- Proof of job
- Proof of investments (if any)
What is a student loan?
Student loans are taken for tuition fees to pay at a reputed institution. Student loans are also known as education loans and they tend to cover the expenses of tuition fees, books, hostel , etc. There are different education loans, each with its eligibility and parameters. You may go for a federal student loan that is taken from the government. Federal student loans usually don’t check the credit score of the student. The interest rate on federal loans can be higher, but its benefits make it worthwhile. Another type of student loan can be a private loan, which you don’t acquire from the government but take from a private source, say a private bank. The interest rates on private and federal loans vary. The third type is a special consideration, and when an individual has taken many student loans, the lender consolidates all the loans together to form one interest payment. Eligibility for student loan depends on a lot of factors, including the credit score, employment status, collateral etc.
Documents required for student loans :
- KYC documents
- Bank statement
- Mark sheets
- Copy of admission letter of an individual along with fees schedule
- Guarantee form- optional
What is a Home Loan?
Home loans are acquired for purchasing a property and act as collateral for the loan tenure. Once the interest rate is paid, the title is shifted to the rightful owner. Home loans are also of different types, home construction loans, land purchase loans, joint home loans, home loan balanced transfers and top-up home loans. All other types of loans are used for different reasons and fulfil different motives. The eligibility to get a home loan varies from country to country. You should have citizenship proof for the country you are applying for a loan in, you should be employed, your age should be in a specific age range, your net monthly salary varies from the cities you are living in, and your credit score.
Documents that are required for Home loans are
- KYC documents
- Your employer ID card
- Salary slips of last 2-3 months
- Documents of proof of business (for business people and self-employed individuals)
- Bank account statement for the last three months for salaried individuals.
- Bank account statement for the last six months for self-employed individuals.
What is a Gold loan?
Gold loans are loans taken by a borrower against their gold articles. The money is provided against the gold, usually up to 80 per cent of the gold. Gold loans are similar to personal loans, and they are needed for our immediate emergencies. It is easy to secure a gold loan, and the interest rates are also lower than other loans. Lenders usually check your eligibility by the gold’s quantity, quality, and credit score. Gold loans are feasible and have a huge demand as they require less documentation and allow us to use the money for whatever reason we want to use it for.
Documents required for a gold loan are:
- Identity proof
- Address proof
What is a Mortgage loan?
A mortgage loan refers to the money taken against an immovable property provided as collateral. The lender keeps the asset until you repay your cash. The property could be anything, a house or a commercial property. This is a good form of financing as you can get massive amounts and pay the loan in a lengthy tenure. But the interest rates are on the higher side.
Mortgage loans are of three types: loans against property, commercial property loans, and home loans. Commercial property loans and home loans are majorly taken to purchase a home, and some restrictions exist. A loan against property is a flexible loan, and you can take the loan for anything and use it to fund whatever you want the money for. Eligibility varies from place to place and also from bank to bank. Still, the general eligibility criteria are that a candidate should have a citizenship card of that country, should lie between a pre-decided age bracket, and should be a working professional with two to three years of work experience.
Documents required for mortgage loans are:
- Latest salary slips for salaried individuals.
- Bank account statement for the previous three months.
- Identity proofs
- Copy of the documents of the property that is mortgaged
- Income tax returns for salaried applicants.
There are many options available if you’re looking for a loan—research well before opting for what type of loan you need and choose the best option available. Interest rates vary from bank to bank, and the benefits also vary. Eligibility and documentation are essential criteria for securing a loan. Be well aware of the other needs of the loan if you are going for it.