Loan

SHG Loan (Self-Help Group Loan)

An SHG loan is a type of credit facility provided to Self-Help Groups — small, usually women-led community groups (10–20 members) that pool their savings and provide mutual support.

How It Works :

1. Formation of SHG –
A group of people (often women from the same village/community) come together, save regularly, and keep the funds in a common account.

2. Internal Lending –
The group first lends to its own members from its pooled savings.

3. Bank Linkage –
Once the SHG shows good savings habits and repayment discipline (usually 6 months+), a bank provides a loan/microcredit to the group.

4. On-Lending to Members –
The SHG distributes the loan to members based on their needs, like starting a small business, farming, education, or emergencies.

Features :

• Group Guarantee – No collateral; repayment is a collective responsibility.

• Low Interest – Often subsidized under government schemes like DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihood Mission).

• Loan Amount – Depends on SHG’s savings record and bank’s assessment.

• Repayment – Usually monthly, with interest decided by the SHG or scheme guidelines.

Benefits :

• Easy Access to Credit for rural poor without formal collateral.

• Empowers Women and promotes financial independence.

• Encourages Savings and responsible money management.

• Improves Livelihoods through small-scale business and income generation.

Home Loan

A home loan is a sum of money borrowed from a bank, housing finance company, or other lender to purchase, construct, or renovate a house. The borrower repays it over time with interest, usually in monthly installments (EMIs).

How It Works :

• Purpose – Buying a new house/flat, constructing a house, buying a plot (with construction), or renovating an existing home.

• Loan Amount – Depends on your income, repayment capacity, property value, and lender’s policy.

• Tenure – Typically 5 to 30 years.

• Interest Rate – Fixed, floating, or mixed, charged on the outstanding amount.

Eligibility Criteria :

• Age (usually 21–65 years)

• Stable income (salaried or self-employed)

• Good credit score (often above 700)

• Proof of income, identity, and property documents

Repayment :

• Own a Home without paying full cost upfront

• Tax Benefits under Income Tax Act (Sections 24(b) & 80C in India)

• Long Tenure makes repayment affordable through EMIs

Gold Loan

A gold loan is a type of secured loan where you pledge your gold jewellery or coins to a bank or financial institution as collateral, and in return, you get money for personal or business use.

Key Features :

• Collateral – Gold ornaments or coins (usually 18–24 karat).

• Loan Amount – Based on the gold’s purity, weight, and market value.

• Tenure – Usually a few months to 3 years.

• Interest Rate – Generally lower than unsecured loans because it’s backed by gold.

• Repayment Options –
# Pay interest monthly and principal at the end (bullet repayment)
# Pay EMIs (principal + interest)
# Pre-close anytime (often with minimal charges).

Process :

1. Submit gold items to lender.
2. Lender checks purity and weight, then assesses value as per market gold price.
3. Loan sanctioned (often within hours).
4. Gold kept safely in the bank’s vault until repayment.

Advantages :

• Fast Processing – Loan approved within hours.
• No Income Proof Needed – Gold itself secures the loan.
• Flexible Use – Money can be used for any purpose.
• Lower Interest than personal loans.

Risk :

• If you fail to repay, the lender has the right to auction your gold to recover dues.

Vehicle Loan

A vehicle loan is money borrowed from a bank, NBFC, or other lender to purchase a vehicle—such as a car, bike, scooter, or commercial vehicle—where you repay the amount with interest over time.

Key Features :

• Purpose – Buying a new or used personal/commercial vehicle.

• Loan Amount – Usually covers 70%–100% of the vehicle’s on-road price (varies by lender).

• Tenure – Typically 1 to 7 years.

• Interest Rate – Fixed or floating, based on borrower’s credit profile.

• Security – The vehicle itself is hypothecated (pledged) to the lender until the loan is fully repaid.

Eligibility :

• Age: Generally 18–65 years
• Stable income (salaried or self-employed)
• Good credit history (higher score = better terms)

Repayment :

• Monthly EMIs (principal + interest) until the end of tenure
• Option for prepayment/foreclosure, sometimes with charges

Advantages :

• Enables you to own a vehicle without paying full cost upfront
• Flexible repayment tenure
• Special schemes for electric vehicles, used vehicles, or fleet purchases

Loan Against Property (LAP)

A Loan Against Property is a type of secured loan where you mortgage your residential, commercial, or industrial property to a bank or financial institution in exchange for funds. You continue to own and use the property, but the lender keeps it as security until the loan is repaid.

Key Features :

• Collateral – Immovable property (house, land, office, shop, factory, etc.)

• Loan Amount – Usually 40%–70% of the property’s current market value (varies by lender).

• Purpose – Can be used for business expansion, education, medical needs, weddings, or debt consolidation.

• Tenure – Typically 5 to 15 years.

• Interest Rate – Lower than unsecured loans because the loan is backed by property.

Eligibility :

• Salaried or self-employed individuals and businesses
• Clear ownership and legal title of the property
• Good repayment capacity and credit history

Repayment :

• Monthly EMIs (principal + interest)
• Prepayment/foreclosure possible (conditions depend on lender)

Advantages :

• Large Loan Amount – Because high-value collateral is offered
• Lower Interest Rates – Compared to personal loans
• Flexible End-Use – No restriction on where you spend the money

Risk :

• If you fail to repay, the lender can legally sell the mortgaged property to recover dues.

Personal Loan

A personal loan is an unsecured loan provided by a bank, NBFC, or other lender to meet personal financial needs without requiring any collateral or security.

Key Features :

• Collateral – None required (loan is based on your creditworthiness).

• Loan Amount – Depends on income, credit score, and repayment capacity.

• Purpose – Flexible; can be used for medical emergencies, education, travel, weddings, home renovation, debt consolidation, etc.

• Tenure – Usually 1 to 5 years (some lenders offer up to 7 years).

• Interest Rate – Higher than secured loans because there’s no collateral.

Eligibility :

• Age: Typically 21–60 years
• Stable income (salaried or self-employed)
• Good credit score (usually 700+)
• Proof of identity, address, and income required

Repayment :

• Monthly EMIs (principal + interest)
• Prepayment or foreclosure may have charges, depending on lender policy

Advantages :

• No Collateral Needed – Easier and faster approval
• Quick Disbursal – Often within 24–48 hours
• Flexible Use – No restriction on end use

Drawbacks :

• Higher Interest Rates compared to secured loans
• Smaller loan amounts than property- or asset-backed loans