Published on May 27, 2020Updated on Oct 19, 2026
A loan is essentially an amount borrowed for a fixed period. The amount borrowed requires it to be repaid along with a predetermined amount of interest that is calculated on the principal amount. There are different types of loans in India which can be subdivided into secured and unsecured loans.
Loans can be broadly categorised into two main types: secured loans and unsecured loans. Let’s explore these categories to understand how many types of loans are available and their unique features.
Secured loans are backed by collateral, which is an asset you pledge as security against the loan. These loans typically offer lower interest rates and higher borrowing limits due to the reduced risk for the lender. Common examples include:
Unsecured loans, on the other hand, do not require collateral, making them accessible to a broader range of borrowers. They are approved based on creditworthiness and financial stability. Some popular unsecured loans are:
Financial institutions offer loans without collateral based on different factors like the borrower’s credit score, repayment history etc. Lenders can avail of these loans to finance different experiences as well as deal with emergencies without creating a dent in their pockets. The different types of unsecured loans you can avail of to finance your requirements are as follows:
You can opt for a personal loan to finance any of your requirements that include education, marriage etc. The number of persons applying for personal loans to finance different needs has increased sharply in the past decade. Between 2015 and 2018, unsecured loans have witnessed a growth of approximately 27 per cent or 4 times the bank credit. The increase in borrowing growth is attributed to several reasons like lower interest rates, liquidity and quicker disbursements etc. Receive an estimate of the amount you are eligible for with the help of a personal loan eligibility calculator.
The required documents for personal loans include:
It doesn't matter whether you are a budding entrepreneur or a business person looking to expand your business. Business loans have your back with customized solutions for all your requirements. You can avail of a business loan right from financing your capital requirements, expanding premises as well as hiring staff. The advantages of opting for small business loans include:
Designed to finance the educational pursuits of students, these loans cover tuition fees, living expenses, and related costs, easing the burden of educational expenses. Apply for Personal Loan for Higher Education.
Designed to cover wedding expenses, these loans help couples create memorable celebrations by offering funds for venues, catering, attire, and other wedding-related costs. Apply for Personal Loan for Wedding.
Enabling individuals to enjoy their dream vacations, these loans provide the necessary funds for travel expenses, accommodations, and leisure activities, making travel aspirations a reality. Apply for a Personal loan for Holiday.
Working capital loans help businesses cover their day-to-day operational expenses. These loans are typically designed to bridge the gap between when businesses incur expenses and when they receive payments from customers or clients. Lenders determine the loan amount based on various factors, including the company’s inventory levels, the business’s financial health, and overall working capital requirements.
Working capital loans are particularly beneficial for businesses with seasonal sales patterns or irregular cash flow, as they help maintain smooth operations and ensure stability during slower periods.
Secured loans require you to provide an asset as a security against your borrowing. The assets secure the rights of the lender in case the borrower cannot make good the borrowings. The loans have a lower rate of interest as compared to unsecured loans. The Pradhan Mantri Awas Yojana initiative by the Prime Minister of India has provided a major impetus to home loans in India. A couple of secured loans include:
A home loan provides you with the finance required to purchase or construct the home of your dreams. You have the option of applying for a loan to purchase a new or resale home, home improvement and extension. The lender requires you to pay approximately 20% of the cost of the home upfront.
You can opt for a longer repayment tenure to ensure that the home loan does not cause a strain on your finances.
Property loans allow you to mortgage your property to avail of funds to finance your business or personal requirements.
The loan amount disbursed ranges between 60-70% of the market value of a residential or commercial property. Negotiate with the representative of the lender to vail the best value on your property.
Contact the lender’s representatives to avail of a product that best suits your needs.
Loan against securities allows you to capitalize your investments by pledging them to borrow funds for personal or business requirements. You have the option of pledging investments like shares, mutual funds etc. Advantages of opting for a loan against securities include:
Pledge a wide number of approved securities like shares, mutual funds, bonds etc. to obtain a loan of approximately 70% of the units pledged. Reap the benefits of multiple repayment options and no prepayment charges.
A financial instrument where you pledge your gold assets as collateral to secure a loan, providing immediate liquidity while retaining ownership of your gold holdings.
An arrangement allowing policyholders to borrow against the cash value of their life insurance policies, without surrendering the policy itself.
A financing option that permits the use of mutual fund units or shares as collateral for obtaining a loan, preserving long-term investments.
Borrowing against your Provident Fund (PF) or Employee Provident Fund (EPF) balance, offering a source of short-term funds without affecting your retirement savings.
A credit facility where a fixed deposit serves as collateral, allowing access to funds while maintaining the deposit's interest and tenure.
A structured lending arrangement for financing the purchase of vehicles, including cars and two-wheelers, tailored to meet transportation needs.
A financial product designed to facilitate the acquisition of an automobile, either new or used, through structured lending and repayment terms.
A loan product specifically intended for the purchase of two-wheelers, streamlining the process of acquiring such vehicles.
*The availability of different types of loans varies from lender to lender. For more information about the types of loans available at SMFG India Credit, please feel free to contact us.
In the world of lending, the choice between secured and unsecured loans comes down to a careful consideration of individual circumstances and financial goals. Secured loans, backed by collateral, offer lower interest rates, higher loan amounts, and easier approval for those with valuable assets. However, the risk of asset loss in case of default can be a significant drawback, making it crucial to weigh the benefits against potential consequences.
On the other hand, unsecured loans, although have stricter eligibility criteria, provide borrowers with a more accessible and versatile financing option. They require no collateral, offer faster approval, and allow funds to be used for various purposes without restrictions. Ultimately, the decision hinges on personal financial stability, risk tolerance, and the intended use of the loan.
Important Note: This article is for general informational purposes only and may be subject to change from time to time. As product features, eligibility criteria, interest rates, charges, fees, tenures and other terms may be revised as per SMFG India Credit's policies, readers are advised to refer to the latest details from the respective product pages (please select from the top menu). For the latest loan charges, please visit Charges & Fees Link and for the latest Interest rates, please visit Interest Rate Rationale. Please note that final loan terms, disbursement process and eligibility criteria will depend on SMFG India Credit's policies at the time of loan application.
The content of this article is for information purposes only and does not constitute as, an offer or advise to avail any products or services from, or, a commitment to grant any loan by the company. It is not intended to create any rights or obligations against us. All content is provided "as is" without any warranty of any kind, either express or implied & we disclaim any warranty or representation, whatsoever, in regards to the content. Please refer to the Privacy Policy of the company to understand the use, processing and storage of your personal data.
Unsecured loans typically have higher interest rates due to the lender's risk, as there is no collateral involved. Borrowers pay a premium in the form of higher interest to compensate for the increased risk undertaken by the lender.
Yes, personal loans offer financial flexibility and can be used for various purposes, including starting a business. However, the terms and conditions of the loan, including interest rates and eligibility, may vary depending on the lender.
Yes, self-employed individuals can secure loans in India. In addition to meeting general eligibility criteria, they should demonstrate a minimum yearly profit after tax, which varies based on the industry and profession.
Typically, you can have joint borrowers on a loan, such as your spouse, parents, or siblings, depending on the lender's policies. The specific number of joint borrowers allowed may vary among lenders and loan types.
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