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What Are The Different Types Of Loans In India?

Jaagruk Bharat

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Updated: 02-04-2025 at 3:31 PM

Indian individuals and companies receive financing by taking out loans to handle their necessary costs. Companies, including commercial and public banks, plus NBFCs and government bodies, provide loans to serve all sorts of financial needs of the public and organisations. Your understanding of different kinds helps you choose the best options.

This article explains different types of loans exist in India and their advantages, along with requirements and submission rules. So, let’s begin.

Overview

Category	Type of Loan	Key Features
Secured Loans	Home Loan	Used to purchase or construct a home, tenure up to 30 years, interest rate 8-12%.
	Loan Against Property (LAP)	Borrow against residential/commercial property, tenure up to 20 years.
	Gold Loan	Quick loan against gold jewellery, low interest rates, and fast processing.
	Vehicle Loan	Used to buy cars, bikes, or commercial vehicles, covers up to 90% of the cost.
	Education Loan	Funds higher education in India & abroad, repayment starts after a moratorium.
Unsecured Loans	Personal Loan	Multipurpose loan for medical, wedding, and travel needs, with quick approval.
	Business Loan	For business expansion, working capital, inventory purchase, and MSME support.
	Credit Card Loan	A short-term loan using available credit limit, with high-interest rates.
	Agriculture Loan	Helps farmers buy seeds, equipment, and manage crop production.
	Microfinance Loan	Designed for rural individuals, self-help groups, and small businesses.
Government Loan Schemes	Pradhan Mantri Mudra Yojana (PMMY)	provides financial aid to micro and small enterprises.
	Stand-Up India Scheme	Supports SC/ST and women entrepreneurs for business startups.
	Startup India Loan Scheme	Encourages startups with financial aid and tax benefits.
	Kisan Credit Card (KCC)	Provides low-interest loans for farmers.
	Education Loan Interest Subsidy (CSIS)	Interest-free loans for economically weaker students during the moratorium.

What Are The Types Of Loans In India?

Most loans in India come as secured loans or unsecured loans, depending on the purpose and terms. You must place a valuable asset with the loan as security to obtain a secured loan, while unsecured loans depend only on your credit rating. We will now study the main kinds of lending products.

1. Secured Loans

Loans that require security demand that the borrower put an asset on hold while receiving funds. Lenders charge lower rates and approve more money when securing loans because the assets provide them protection against risk.

Types Of Secured Loans

Home Loans

Home loans let people buy houses as well as design new residential buildings or enhance existing property types. Most borrowers handle their repayments effectively because the loan terms extend for 30 years.

Eligibility: Salaried or self-employed individuals with a stable income.
Interest Rates lie between 8% and 12% annually.
Government Schemes: The PMAY government program offers interest-benefit support to first-home buyers through specific housing programs.

Loan Against Property (LAP)

The Loan Against Property programme lets people get money by using their homes or commercial buildings as guaranteed security.

Loan Amount: Borrowers can receive between 60-70 per cent of their property value through this loan.
Usage: Business expansion, medical expenses, education.
Tenure: Up to 20 years.

Gold Loan

Borrowers get short-term financial assistance by presenting their eligible gold objects as collateral.

Processing Time: The bank delivers the funds rapidly within a day.
Interest Rates: Most Indian banks start loan rates at 7.5% every year.
Popular Lenders: Muthoot Finance, Manappuram Finance, Public and Private Banks.

Vehicle Loan

People can use vehicle loans to acquire cars, trucks, and other forms of vehicles.

Loan Amount: The loan covers 90% of the final market price of the vehicle.
Tenure: 3 to 7 years.
Interest Rates: Ranges between 7% and 15%.

Education Loan

Higher education learners, both within India and overseas, receive financial aid from education loans.

Loan Amount: The program lets students borrow up to 1.5 crores from the bank for education abroad.
Repayment: Starts after the moratorium period (course duration + 1 year).
Government Support: Weakened Socio-Economic Groups Qualify for Government Funding through the CSIS Scheme Interest Assistance.

Also Read: Benefits Of Making Women A Co-Borrower In The Loan

2. Unsecured Loans

People and businesses commonly use this loan type because it works without mandatory security deposits. Since lending to riskier borrowers presents more danger for the lender, these loans have higher interest rates and tougher borrowing standards. People choose these loans for immediate financial demands and can spend the funds on personal life or professional business requirements.

What Are The Different Types Of Unsecured Loans?

Personal Loan

The loan serves multiple goals, including supporting wedding plans and covering urgent health expenses while enabling travel and other purposes.

Loan Amount: ₹50,000 to ₹40 lakh.
Interest Rates: 10% to 24% per annum.
Tenure: 1 to 5 years.
Approval Time: Within 48 hours for eligible applicants.

Business Loan

Organisations take these loans to grow their operations, manage business funds, and buy stocks for their inventory.

Eligibility: Business turnover, credit score, and financial records.
Loan Amount: ₹50,000 to ₹5 crore.
Government Schemes: MSME Loan under Mudra Yojana.

Credit Card Loan

Borrowers can access unsecured funds through their credit card limits before applying.

Interest Rates: 24-36% per annum.
Processing: Instant approval for eligible cardholders.

Agriculture Loan

This lending platform helps farmers buy seeds, farming materials, and tools.

Loan Amount: A farmer obtains credit based on their land plot size and desired crops.
Interest Subsidy: Agricultural Schemes decrease the interest rates for farmers.
Repayment: Farmers repay the loan contingent on their annual harvest results.

Microfinance Loans

These loans assist people who live in rural regions but cannot use banking services.

Loan Amount: Customers can borrow between ₹10,000 and ₹2 lakh through this product.
Beneficiaries: Self-help groups (SHGs), women entrepreneurs, and small businesses.
Popular Institutions: Bandhan Bank, Ujjivan Small Finance Bank.

Also Read: Get A ₹50,000 Loan Using Your Aadhaar Card.

What Are The Government Loan Schemes In India?

The government supports several loan schemes which offer monetary help to organisations across business sectors and agricultural sectors, along with startup sectors. Such financial programmes provide reduced rates together with cost incentives alongside flexible payment structures to foster economic expansion alongside financial inclusivity.

Scheme Name	Objective	Launched By	What is Offered?
Pradhan Mantri Mudra Yojana (PMMY)	Provides business loans for micro and small enterprises	Government of India	Loans up to ₹10 lakh with flexible repayment options
Stand-Up India Scheme	Supports women and SC/ST entrepreneurs in starting businesses	Government of India	Loans from ₹10 lakh to ₹1 crore
Startup India Loan Scheme	Encourages new business ventures with funding	Government of India	Financial assistance and tax benefits for startups
Kisan Credit Card (KCC)	Provides credit support to farmers	RBI/NABARD	Low-interest loans for crop production and farming needs
Education Loan Interest Subsidy (CSIS)	Offers interest relief for economically weaker students	Ministry of Education	Interest subsidy on education loans during the moratorium period

Key Factors To Consider Before Taking A Loan

The financial decision to take a loan demands a detailed evaluation before making the choice. Borrowers need to analyse multiple vital aspects before initiating the application process to determine their ability to handle loan payments without economic difficulties. By studying the credit score along with interest rate conditions and concealed fees you can make better decisions regarding your loan options.

Credit Score:

People who achieve credit scores higher than 750 will have better chances when requesting loan approval.

Interest Rates:

Potential borrowers must examine whether to choose fixed-rate financing versus floating-rate financing.

EMI Calculation:

Customers should use online EMI calculation tools to determine repayment terms.

Hidden Charges:

All parties should inspect the account for processing expenses, together with prepayment fees and penalties.

Conclusion

The various loan types present in India require knowledge to ensure suitable financing decisions. The process of selecting between secured and unsecured loans becomes crucial because individuals need to analyse both eligibility and the interest rates along with payment terms. Subsidised Government loan schemes are available through financial support programmes.

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