A loan is a form of contract in which one party (a bank or a loan provider company) agrees to pay an agreed sum of money to another party( borrower), and charge a fixed amount of interest on the amount borrowed. For getting a loan you are required to fulfill various conditions like income proof, residence proof etc. The interest calculated or levied depends on the amount of loan, interest is nothing but a fee or rent paid on borrowed capital. There are various types of interest like simple interest and compound interest, the simple interest is calculated on the principle money or the loan left unpaid, on the other hand the compound interest is calculated on the amount (principle plus loan). To make your dream come true you can have a loan, and now with easy monthly installments (EMI), the repayment is also stress free.
Loans are of various types depending upon needs and on the type of rate levied on them. The various types of loans are:
Depending on need:
(1) Personal Loans: A personal loan is very easy to get and it is meant for your personal needs like marriage expenses, home renovation and various other reasons. Various banks offer personal loan up to an amount of 15lakhs with very less documentation.
(2) Business Loans: This loan is meant for investment in the business, with the loan you can buy your raw materials, for business expansion and you can also spend the money for giving your work place a new look.
(3) Home Loans: For buying a dream house you can go for a home lone, this lone is provided by almost every national and private bank, there is no limit of this loan. With doorstep services you can get a home lone at your house. For this type of loan the EMI (easy monthly installment) period varies from months to years.
(4) Car Loans: A car loan is meant for buying a new or a second hand car, in this case loan money is little less than the cost of the car. The interest rate varies with the bank you are getting a loan from. Nowadays the car manufacturing companies like Maruti Suzuki India ltd are providing insurance.
(5) Commercial Vehicle Loans: With this loan you can buy commercial vehicles like buses and trucks etc. These vehicles are very costly and buying on a single payment is very difficult.
(6) Two Wheeler Loan:This loan is provided for getting a two wheeler like motorbike and scooter etc.
(7) Farm Equipment Loan: With this loan you can buy tractors and various other equipments used in farming.
Depending on rate:
(1) Fixed Rate: For the whole duration of the loan the rate interest is same, the type of interest applied on commercial lone is generally compound.
(2) Floating Rate: As you repay the loan, the amount of interest also decreases. In floating type loan the interest is calculated on the amount of loan left and the rate of interest also changes as you repay the loan.