An Overview About Loans: Definition and its Types

In the present era of digitalisation, finding a money lender is not a big deal. There are several banks and agencies that lend money at different interest rates for different purposes. Taking a loan has a different purpose for everyone, for some, it is to go on a long-awaited vacation, for some it is a way to buy their dream vehicle. It is possible to find some money lenders that are good at money lending in toa Payoh. Before we study the loan types, let us know a bit more about loans. Below the definition of a loan is discussed.

Defining Loan

An amount borrowed money to be paid back with interest within a fixed duration is known as a loan. There are many different types of loans in the market. Some of them are described below.

Types of loan

Considering the fact that different humans have different needs and desires, the money requirements also vary based on them. For example – higher education, marriage expenses and business startup or expansion. Below are some types of loans that can be taken according to personal preference.

Personal loan

This loan type is taken for personal needs. It could be used for some investment, house repairs, appliances to be bought or simply to carry out routine sustenance.

Student loan

An educational loan which is also known as a student loan is gaining quite a preference in today’s era. The loan is taken when a student wishes to pursue higher studies and requires a large sum of money.

Mortgage loan

This loan type is the largest loan that can be granted. The reason is that usually quite expensive items such as houses, property, vehicles etc are mortgaged. For example, this type of loan can be taken in case you plan to buy a new house.

Car loan

As the name suggests, this loan is available to buy an automobile. It helps in easy payment of EMIs.

Two-wheeler loan

Same as the car loan, a two-wheeler loan is granted to a person who needs funds in order to buy a two-wheeler vehicle.

Conclusion

Loans are available in many types and have a category for every requirement type. All the loan types have their own set of pros and cons. More or less, it should be ensured that a loan is taken only if they own the capability to repay it with interest. Although a loan is vital to increase cash flow, it may also break a business down to losses. It is in the borrower’s hands to spend the money in an appropriate profitable manner.

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