Loan lexicon

Know about loans with the help of the following terms

Loan lexicon
Loan lexicon
OLM Desk - 31 August 2017

Secured Loan: These loans are backed by assets, such as a home or car, that belongs to the borrower in order to decrease the risk assumed by the lender. Usually in secured loans, the end use of loan amount drawn is given, which means a car loan cannot be used to pay for home improvement.

Unsecured Loan: With these loans you need not put your collateral against the loan. The loan is given on the basis of your income and expense behaviour. Personal loans or loan against credit cards are the most common form of unsecured loans.

Education loan: This is a priority sector lending by the banks which not only finances studies in India, but also abroad. The interest rate on this loan and related scheme is standardised across lenders. And, if you have taken education loan and are repaying the same, then interest paid on education loan is allowed as a deduction from the total income under Section 80E.

0% interest finance: There is no truth in this zero per cent tag. These loans are typically available on gadgets and appliances, where the pricing itself is based on the 0 per cent concept. What this means is that there is no way to compare the current cash price of the product, as it is not on offer. The cost of the gadget or appliance is bundled with interest and other charges, which are not broken down to evaluate the real cost of goods.

Preapproved loans: Based on your past repayment experience on a loan and through big data analytics, lenders these days offer pre-approved loan of some amount to you. This is one way to entice you into a loan, even when you may not be interested in borrowing.

Loan against property/shares: For those with assets like a home or investments in shares, lenders offer loans against such securities. As these fall under secured loans, their rates are relatively lesser than unsecured loans.

Read: A Loan to Fund Every Need


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