What is Secured Loan Meaning? Types, Features & Eligibility
Secured loan - Meaning
A secured loan is a loan that requires an applicant to undertake collateral or security such as property, equity or a car, etc., to aid the loan. A lender can request security or collateral for a high amount of loans for which the money is used to purchase an asset. And if an applicant levant for their repayment of the loan then the bank or the lenders have the right to take assets of the secured debt or collateral. A secured loan might allow an applicant to have the benefit of a lower rate of interest as it seems to have a lower risk to the lenders.
Secured Loan Features
- Loans are provided against the ownership of the assets, which will be utilized as a security or collateral such as Vehicles, Assets, Homes, Property.
- Approval of loans is very fast.
- Choice of variable rates and fixed rates.
- CIBIL SCORE should be improved.
- There is no requirement for surety for such types of loans.
- As compared to unsecured loans, secured loans have a lower rate of interest, as the banks have a higher level of trust in the ability of an applicant to pay it back.
- Generally, a secured loan is taken for the large sum
- Secured loans are available to non-salaried individuals.
- Banks should reclaim the assets for which the loans were taken.
- More open-ended repayment choices than the other loans.
Secured Loan Eligibility Criteria
- 18 is the right age for an applicant but some banks need the applicant age to be 21 years or above.
- Nationality – Resident of Indian
- Income should be generated from the regular salary, business income, and non-salaried income.
- Most lenders needed the borrower to have a minimum annual income of 3 lakh p.a.
- The borrower should have the asset that exceeds the value of the loan or the value must match as required.
- The Loan might also be allowed to the farmers and HUF (Hindu Undivided Family).
- Few banks offer loans to NREs, NROs, or NRIs.
Types of Secured Loan
There are several types of secured loans in India given below:
- Loan against property (LAP) - A loan against property is the most common form of the secured loan that is authorized against the asset mortgage as security or collateral. This asset can either be a house, owned land, or any other commercial evidence. LAP is also called a mortgage loan. Property loan provides an applicant to provide a higher amount of loan at a lower rate of interest at 8.20% p.a. Banks generally allow mortgage loans between 50% to 70% of the property as per the market value.
- Gold loans – The gold loan is a secured loan. It is also called a loan against gold. An applicant takes a loan from the banks or the lenders against gold. A gold loan requires the borrower to assure gold coins or jewelry as a security or collateral.
- Loan against fixed deposits - A loan against fixed deposits is a form of a secured loan where the borrower can oath their FD (Fixed Deposits) as collateral and get the loan amount in return.
- Home loans – A home loan is a secured loan that is secured to the property by offering it as a security or collateral. It offers high funding at an economic rate of interest for a longer tenure. There are various types of home loans such as land purchase loans, Joint home loans, Top-up home loans, home loans balance transfers, home construction loans, etc.
- Loan against mutual funds and shares – A loan against mutual funds and shares is also known as a loan against securities (LAS). It is a loan where the borrower has to pledge for mutual funds, shares, or life insurance policies as a security or collateral to the bank against their amount of loan.
- Loan against insurance policies – the borrower can avail himself of the loan against their insurance policy. The sanctioned amount for the loan is generally 85% to 90% for the surrender value of the policies. Such types of loans are provided by other financial institutions that give loans against securities or the insurance companies themselves. It is also called pledging, which is an especially popular concept abroad.
Therefore, you can compare and choose the great deals offered by Banks and Financial institutions for secured loans. Apply through financeseva for best deals.
Also Read:- A Complete Guide on Project Report for Bank Loan
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