Types Of Loan
Term Loan
A term loan is a monetary loan that is usually repaid in regular payments over a set period of time. Term loans usually last between one and ten years, but may last as long as 30 years in some cases. A term loan usually involves an unfixed interest rate that will add additional balance to be repaid.
Working Capital Loan
Working capital loans are used by enterprises to meet their daily business requirements and for various business expansion services, enhancing business cash flow, purchasing raw materials, addition in inventory/stock, paying salaries, hiring staff, etc. Working capital loans are majorly short-term loans in which the repayment tenure is up to 12 months. This loan is also termed a collateral-free loan in which the borrower is not required to submit any collateral or security with the bank. The interest rate offered is a bit higher, as compared to long-term loans or general business loans. In this type of loan, the bank sets a limit for the business to take a loan and the amount can be utilized for specific business purposes, only
Loan against Property
A loan against property(LAP) is a secured loan that is sanctioned against the asset pledged as collateral. This asset can either be an owned land, a house, or any other commercial premises. The asset remains as collateral with the lender until the entire loan against property amount is repaid.
Loans under Govt. Schemes
The Government of India has initiated various loan schemes to promote individuals, MSMEs, women entrepreneurs, and other entities engaged in trading, services, and manufacturing sectors. The loans under government schemes are offered by various financial institutions, such as private and public sector banks, NBFCs, Regional Rural Banks (RRBs), Micro Finance Institutions (MFIs), Small Finance Banks (SFBs), etc. Some of the leading Govt. Loan schemes include Mudra Scheme under PMMY, PMEGP, CGTMSE, Standup India, Startup India, PSB Loans in 59 minutes, PMRY, etc.
Overdraft Facility
Overdraft facility is a funding type offered by a bank to its account holder to withdraw cash from his/her account even if the account balance is zero. The interest rate is charged only on the utilized amount from the sanctioned limit and on a daily basis. The credit limit that is sanctioned depends upon the account holder’s relationship with the bank, credit history, cash flows, and repayment history if any. The overdraft limit is revised every year and can be used in any manner if the interest is paid on time. An overdraft facility is offered against collateral/securities, especially in terms of FDs with the bank.
Bill / Invoice discounting
Under this type of lending, Bank takes the bill drawn by borrower on his (borrower's) customer and pay him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower's customer on the due date of the Bill and collects the total amount.
Equipment Finance or Machinery Loan
The equipment finance or machinery loan is a funding option offered to the borrowers for them to purchase new equipment/machinery or to upgrade the existing. Equipment finance is used mainly by large enterprises and enterprises engaged in the manufacturing sector. Enterprises or business owners availing equipment finance or machinery loan also enjoy tax benefits. The interest rate, loan amount, and repayment tenure offered shall vary from lender to lender.
Non – Fund Based facilities
The Non-Fund based Credit Facilities are nature of promises made by Banks in favour of a third party to provide monetary compensation on behalf of their clients, where the lending bank does not commit any physical outflow of funds.