You can avail loans from financial institutions such as banks and NBFCs (non-banking financial companies) to obtain funds for various types of requirements. In most cases, loans are earmarked for a specific purpose - a car loan is to purchase a car, a online home loan is to buy a house and an education loan is to fund your education. Then, there are personal loans that you can avail for your personal expenses such as weddings, vacations, shopping and more.
Banks/NBFCs usually grant loans against collateral. For a home loan, your house serves as the collateral; for a car loan, the car is the collateral; and in the case of an education loan, your degree is the collateral. A personal loan, on the other hand, is an unsecured loan, i.e. it is granted without any collateral, very much like credit cards.
Since personal loans are granted purely on a good faith basis (as there is no collateral involved), the lender charges a higher interest rate on personal loans. While different lenders charge different rates of interest on personal loans, you can expect the interest rate to be anywhere between 8% p.a. to 30% p.a. depending upon various factors like your creditworthiness, loan tenor and the purpose of the loan.
As mentioned above, there can be various reasons to apply for a personal loan. Whether you are planning a grand wedding ceremony or a long due home renovation, a personal loan can be really helpful if you do not have enough financial liquidity. Here are 11 types of personal loans that you can apply for based on your requirements-
India is known for lavish wedding ceremonies. The day of the wedding is definitely one of the most important days in the lives of not only the bride and the bridegroom but also their parents and family members. Everyone, therefore, wants to make this day special and memorable which may involve extravagant spending and one may not have enough liquid funds available at their disposal. For this reason, many families apply for a wedding loan.
A wedding loan can be applied for either by the would-be bride/bridegroom or by a family member.
The loan amount can be as low as ₹1,000 and can go up to ₹25 Lakhs.
The repayment tenor for a wedding loan is anywhere between 3 months and 6 years.
Vacations, especially foreign vacations, can be heavy on your pocket. If you are planning a holiday with your family or friends at an exquisite destination, you may consider applying for a travel loan to ease your financial burden. A travel loan is a personal loan availed to fund your holiday expenses. Often, you also get complimentary travel insurance with travel loans.
Simple application process and easy approval.
Most banks will grant you a travel loan of up to ₹40 Lakhs.
The repayment tenor of the loan can be up to 5 to 6 years.
You can get a home loan to buy a new house, but what if your old house is in urgent need of repairs and revamps? That’s where a home renovation loan comes into the picture. A home renovation loan is a personal loan granted by a bank/NBFC to provide for the cost of renovation of your old sweet home. When you renovate your old house, you not only get a better place to live in, the economic value of your old house also increases significantly.
The loan amount can be anywhere between ₹2 Lakhs and ₹40 Lakhs.
The repayment tenor for a home renovation loan can go up to 30 years.
Apart from secured education loans that are granted against collateral such as your graduate degree or a real estate property, many lenders also offer unsecured personal loans to help you fund your education. You can use this education loan to pay your tuition fee, residence fee and to provide for any other academic requirements.
Most banks will grant you a personal loan to fund education-related expenses of amounts up to ₹20 Lakhs.
The tenor of a personal loan taken to fund education can go up to 5 to 6 years.
If you are a retired individual, it might sometimes be difficult to make both ends meet, especially if there are medical bills to account for. For such individuals, some banks offer pension loans. A pension loan is a special type of personal loan meant specifically for retired individuals. Since it is a loan only for retired individuals, the regular eligibility criteria for other personal loans are not applicable for pension loans.
Pension loans are granted only to those retired individuals who get a regular pension.
The loan amount can be 7 to 10 times the amount of the pension drawn in the month preceding the month in which the loan application was submitted.
The repayment tenor for pension loans can be 5 to 6 years.
Festival celebrations can often account for expenses that you might not have planned for while budgeting. Some banks and NBFCs offer personal loans to provide for the extra expenses incurred in festival celebrations. Most banks will grant you festival loans of amounts only up to ₹50,000.
It is another type of personal loan. As the name suggests, a consumer durables loan is provided by banks and NBFCs to provide for the necessary funds for purchasing consumer durables such as air conditioner, refrigerator, TV, washing machine, etc. You can easily get a consumer durables loan of amounts up to ₹5 Lakhs from banks and NBFCs for purchasing such white goods.
In this technology driven era, computers and mobile phones have become inseparable parts of our lives. Many banks and NBFCs therefore offer personal loans of small amounts just for this specific need of the borrowers. In many cases, you also get a complimentary insurance cover for the purchased item with the loan.
Medical emergencies seldom come with a warning, and with the rising cost of medical treatments and hospital bills, it is very much likely that you do not have enough liquid cash available with you at the time of an emergency. In such a situation, an instant medical emergency loan can be a lifesaver. Depending upon your eligibility and creditworthiness, you can easily get a medical emergency loan of amounts up to ₹ 25 lakhs for a tenor of up to 5 to 6 years.
An agriculture loan is a personal loan granted to farmers to support them in farming and agricultural activities. Agriculture loans are usually offered at a lower interest rate and have a flexible repayment tenor.
Debt consolidation essentially means availing a new loan to pay off your existing loans. Usually, people take a personal loan at a lower interest rate (say 10% to 15% p.a.) to pay off another loan that incurs a higher rate of interest, such as a credit card loan (interest rate of 40% to 45% p.a.).
Many banks and NBFCs would grant you a personal loan of an amount up to ₹25 Lakhs for debt consolidation. The interest rate applicable on these debt consolidation loans is obviously higher than that for secured loans, but still much less than that applicable on credit cards.
Although personal loans come with a higher rate of interest than many other types of loans (such as home loan, car loan, etc.), they can be really helpful in many cases. A personal loan can not only allow you to live the dream of a grand wedding ceremony but can also be a lifesaver in case of a medical emergency. It is one of the most versatile loan products in the market that you can use to fund a variety of your expenses.
The different types of Personal Loans available in India are:
By conducting thorough research and comparing the loan offers and interest rates of various banks and NBFCs, you can find the right personal loan that suits your needs.
Weddings require a lot of money for venue booking, catering, etc. Hence, you can opt for a personal loan for a wedding to fund your requirements.
All kinds of personal loans are easier to obtain if you fulfil the eligibility criteria and have the necessary documents to apply for a personal loan.