In today’s financial world, loans play a crucial role by providing necessary financial support to the businesses and individuals in fulfilling their financial needs. From buying a new home, starting a business, education funds requirements to personal requirements, loans are seen as the medium to meet these requirements. In this article, we will cover various aspects of loans for easier understanding of its types, benefits and processes.
What is Loan?
In simpler terms, a loan is a financial arrangement including two parties – lender and borrower. In this arrangement, the lender provides a specific sum of money to the borrower as per the agreement and the borrower shall repay the amount along with the interest, over a specified period.
The statistical information on the top consumption loans basis Portfolio outstanding and Active Loans is illustrated below:
Following snapshot reveals the major consumption loan products and a comprehensive analysis of their growth in Financial Year 2023-24.
Types of Loans
There are several types of loans designed to cater to different financial needs of users. Some of them are elaborated below:
- Personal Loans: Personal loans are unsecured loans that are used for a variety of purposes including paying for home renovations, funding a vacation, planning for wedding or other occasion, meeting urgent needs like medical emergencies. These loans are offered without any collateral and have flexible repayment terms. They have a higher rate of interest due to the unsecured nature of the loan.
Refer below to have understanding on the growth analysis of Personal Loan for three Financial Years.
- Home Loans: A home loan is a type of secured loan provided by banks, financial institutions and NBFCs for the purpose of buying or purchasing a home or a property by offering it as a collateral security.
In recent years, home loans have become popular in India due to the significant rise in demand for affordable housing. Home loans are provided at economical interest rates for a long period. Interest rates can be fixed or floating. Repayments are made through EMIs (Equated Monthly Instalment). After the repayment, the home/property’s title is transferred back to the borrower.
The types of home loans includes:
- Land purchase loan
- Home construction loan
- Top up loan
Portfolio snapshot elucidating the growth and market share of Home Loans.
- Business Loans: Business loans can be availed for the purpose of starting a new business, expansion of business, meeting working capital requirements. Such loans can be availed for short-term or long-term depending on the financial needs.
Interest rates are dependent on the business’s financial health and creditworthiness.
- Gold Loans: Since ancient times, gold is considered as the most favourable financial asset. To avail a gold loan, one needs to pledge gold jewellery or coins as a collateral. They generally have a shorter repayment tenure as compared to home loans.
- Education Loans: These loans are used to finance higher education expenses including expenses of tuition, books and living. Education loans are provided at subsidised and flexible interest rates accompanied with a grace period of repayment. These loans are generally funded by the government.
■ Also Read: Net Banking V/s Traditional Banking: A Comparative Overview
The Benefits of taking a Loan
- Immediate access to funds: This is one of the significant advantages of taking the loan. In case of unexpected emergencies, immediate necessary funds can be availed through loan.
- Debt consolidation: Loans are an effective tool for debt consolidation. In case of a higher debt in the form of credit card balances, personal loans can be used to consolidate them into a single liability, thereby simplifying finances.
- Enables business growth: Loans act as an essential component for long term funding for entrepreneurs and businessmen. It helps the businesses to operate effectively by providing the necessary funds at the right time.
- Offers tax benefits: Typically, loans like home loans have certain tax benefits, the interest paid is often tax-deductible thereby reducing the overall tax liability. Education loans also have certain deductions on interest payments.
- Prepares for financial emergencies: As life is unpredictable, it is necessary to have a safety cushion all the time. Personal loans safeguards during tough times like unforeseen medical emergencies, urgent home repair, meeting sudden expenses, etc.
True Wealth of A Human Being Is Not Money
In the search of wealth and finding more ways to manage the wealth, today’s society is forgetting the actual purpose of human life. Jagatguru Tatvdarshi Sant Rampal Ji Maharaj enlightens us that the true purpose of a human life is achieving liberation through the authentic worship of God Kabir, Creator of the Universe.
Sant Rampal Ji Maharaj, further, elucidates that all souls are trapped in this Kaal Brahm or Satan 21 universes. Kaal Brahm ensures we remain trapped in the continuous cycle of birth and death, being reborn into 84 lakhs species depending on our accumulated good and bad deeds. Kabir Saheb has stated:
Kabir, Yeh Maya Atpati, Sab Ghat Aan Adi |
Kis Kis Ku Samjhau, Kuye Bhaang Padi ||
The true wealth of a person lies in his spiritual accomplishments and not in material pursuits. Listen to the path-breaking spiritual discourses of Sant Rampal Ji Maharaj and discover the key to ultimate happiness, peace and salvation.
Visit www.jagatgururampalji.org for the detailed knowledge of our holy scriptures.
