The loan, this four-letter word, has become quite popular recently. From basic necessities such as food, clothing and shelter to luxuries, everything is available on credit. But why loans There are so many things that, if you plan for them, take years to achieve or buy. Loans make it a little easier for anyone to say goodbye to a dream that they want to realize today. Different types of loans and different types of lenders are therefore available in the market, and let us take a close look at such examples of three types of loans that may seem the same but are actually different.
Let us first understand two basic types of loans. Secured loans and unsecured loans. A secured loan is something that the borrower must keep or has kept as collateral for the money borrowed. The gold loan, car loan, home loan are some examples of secured loans. Personal loans and business loans are examples of this. It is also important to note that credit score is one of the most important factors in the approval or rejection of a loan. low credit score or conventionally speaking a low credit score makes loan application disapproved.
A home loan is, of course, a secured loan where the borrower wants to buy a house and therefore borrows money from the lender, a financial institution. Either a bank or an NBFC (Non-Banking Financial Institution) checks the eligibility of the borrower through various checks and then approves the application. There are various banks that offer home loan with lucrative interest rates. HDFC home loan is one of the most popular loan
Mortgage Loan
A mortgage is a security provided in the form of an asset against the money required. Here, the borrower willingly holds any property as collateral for the money he wants from the financial institutions. Collateral loan application is easier for loan approval process. A home loan one of the types of mortgage loans that is available.
A concept very similar to the mortgage loan is the loan against property, also known as LAP. A house, a piece of land, a commercial space – all of these things can serve as collateral for a loan.
– It is crucial to recognize that, despite being secured loans with collateral, banks still conduct essential checks, including verifying the CIBIL or credit score. – An individual with a low CIBIL score may face rejection of their loan application. – Additionally, the examination of real estate documents for legal issues and the assessment of repayment capacity are necessary before loan approval.