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A loan is where a borrower takes an amount from the lender to fulfill his financial needs, in return the borrower should pay an interest rate to the lender. There are two types of loans, secured and unsecured.
In the secured type of loans, the borrower should put a surety with the lender and based on the value of the asset, the loan amount is provided.
Unsecured loans are the loans where the collateral is not required, the amount is given based on the borrower’s earnings and trustworthiness.
Now that you know what a loan is. Let’s get to know what a home loan is, in India.
A home loan is a loan which is taken by the borrower to purchase a home. You’re to-be property or asset will be put as collateral with the lender till the loan amount is repaid in full.
A home loan is taken for various reasons and we also have different types of home loans. Below you can find the various types.
Types of home loans in India are:
1. Home purchase loan: As the name suggests this loan type is used for purchasing a home. The borrower can opt for a home purchase loan from the lenders and use it for purchasing a residential property.
2. Land purchase loan: This type of loan is used for purchasing a land either for constructing a house or for future investments. The only exception under land purchase loan is, you cannot buy agriculture land with that loan amount. Compared to other loan types. The tenure period for this loan is less, so the interest payable is higher.
3. Home Improvement loan: If you already own a house but lack funds to renovate or do some improvements to your house, then you can opt for home improvement loans. Home renovation or improvement includes – digging for borewell, repairs to the home, electrical works, painting of walls, etc.
4. Home construction loan: It is a loan that is typically taken by the customers to construct a new home on a plot already owned by them.
5. Home conversion loan: If you have already taken a home loan and need another home loan for second homes, then you can opt for home conversion loans. It is an additional loan amount taken to buy another home, where the outstanding loan is transferred to the new home loan.
6. Home extension loan: This loan type is used for extending or expanding the existing homes. It is a part of home improvement loans, but few banks also offer home extension loans to its borrowers.
With these various home loans, you can benefit in many ways. A few benefits are mentioned below.
•Can purchase a dream home: Purchasing a home is a dream come true to many people. With home loans, it is made easy to purchase a home for each and every one.
•Interest rate: Compared to other loans like home, business or mortgage, home loans have lower interest rates. So, if you avail of home loans, then you can pay a lower interest rate to the lender.
•Capital appreciation: The rate of the property will always grow, so in any which way, you will benefit over time.
With a wide array of home loans and its benefits, you can avail of home loans to fulfill your dream home requirement.
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