Over the past several years, personal loans have emerged as the most popular financial product sought by people. These loans are not only extremely easy to get but also offer great flexibility in terms of the usage of funds. Most personal loans are unsecured and require the submission of minimal documentation by the applicants. All these factors have contributed to enhancing the popularity of personal loans quite significantly, especially among people with limited assets or having low credit scores. These loans are broadly divided into two main categories, namely long-term loans and short-term personal loans.
An Overview Of Long Term Loans And Their Types
Long-term personal loans are those that have a repayment tenure spread across several years. These types of loans are generally offered for larger sums of money and generally come with a lower interest rate. In some cases, the applicants are required to submit some collateral to the lenders due to the high amount of the loan. Most importantly, people applying for these loans can avail tax benefits, although this may depend on the type of loan availed by the borrowers. The brief details of the most common types of long-term personal loans are given below.
Generic Personal Loans
These are classic personal loans that are availed for large sums of money with a repayment tenure ranging from 3 to 30 years. The applicants are expected to have a good credit score to apply for this loan especially if the lenders do not seek any collateral. The maximum amount that can be borrowed depends on the income, repayment capabilities, and credit history of the applicants. The borrowers can prepay the loan amount after a specific time although they would be charged a penalty for the same.
Gold Loans
Another type of personal loan that can be availed by applicants is the Gold loan. This loan is offered to individuals providing gold jewelry, gold coins or gold bars as collateral for the amount to be borrowed. The amount offered in this case is fixed and corresponds to a pre-decided percentage of the appraised value of the gold. Applying for this loan does not require the applicants to have a good credit score.
Loan Against Property
As the name suggests, this type of personal loan is offered to individuals providing property as security against the loan amount. The collateral can be in the form of an apartment, a house, a commercial complex, or a piece of land. The value of the loan is decided as per the valuation of the property by the experts employed by the bank and is generally set at 60-75% of the value assessed. This in turn depends on the clear title of the property, the age, the state of maintenance in which it is, and its location.
Short Term Loans And Their Types
Short term loans are offered for a relatively smaller duration of time and are almost always provided without any collateral. These loans do not require the applicants to have a good credit score and that is why they are also referred to as no credit check loans. The key features of the most common types of short-term loans are discussed in brief as follows.
Line Of Credit
Many times, borrowers may seek loans of large amounts only to realize much later that they actually needed it. Such borrowers can avail of this specific type of short term loan known as line of credit. This loan requires only one time approval by the lenders after which the amount is available to the borrowers for their lifetime. They can withdraw as little as Rs. 3000 or even the entire amount disbursed into their account depending on their needs. The borrowers can apply for the loan anytime and withdraw the amounts required by them later when they are in need of emergency funds. Most importantly the borrowers are required to pay the interest only for the amount actually used by them.
Payday Loans
Also known as instant cash loans, these short–term loans have gained much popularity as the go-to solution for people seeking immediate cash. These loans are generally offered for a period of one month and are expected to be repaid by the borrowers on receiving their next paycheck. Applying for these loans is extremely easy as prospective borrowers just need to search for payday loans near me to get thousands of results. However, borrowers need to exercise caution while selecting the lenders offering such services as otherwise, they might end up being caught in a vicious cycle of debt. In most cases, the payday loans are processed and approved within the same day of application. The borrowers also get the money disbursed into their accounts within a couple of hours of their application being approved. The most important feature of these loans is that they do not require any physical documentation and the entire process is completed online making the process extremely convenient and hassle-free for the borrowers.
