Loan Company

loan companies are the non-banking financial institution registered under the Companies Act, 2013. These financial institutions are engaged in the business of providing funds to the public by either providing loans or credit or any activities other than their own. 

The main function of the loan companies is to raise funds from the public and provide financial assistance to the needy by lending loans. The loan finance company compared to the banking financial institutions have attractive rates of return on the money deposited by the public and the procedure to provide credit facility is also simplified, transparent, and speedy. However, the rate of interest charged on the loans by such companies is relatively on the higher side.

You Might Be Thinking, What Is A Loan?  

Let us inform you that a loan is a kind of agreement wherein the lender (a loan company) lends some amount of asset to the borrower (public) for some time. Here a promise is made that the loan will be paid back by the borrower along with the interest calculated based on the predetermined rate as per terms and conditions of the agreement. 

What Different Types Of Loans Are Offered By The Loan Companies?

Here mentioned are the different types of loans provided by the loan companies to the public:

Based On The Security Mortgaged:

Two types of loans are provided by the loan companies under this category:

• Secured Loans:

These are the types of loans where the borrower is required to pledge their security as the collateral with the company for taking the loan. In case the borrower fails to repay the loan, the company has a right to utilize the mortgaged security for recovering the amount given as a loan. The rate of interest specified for such loans is much lower compared to unsecured loans. 

• Unsecured Loans: 

These are the types of loans where the borrower is not required to pledge their security as the collateral with the company for taking the loan. The loan company analyzes multiple factors like past relationship with the borrower, borrower’s credit score, and other factors to determine if a loan should be lent by the company to the particular borrower or not. The rate of interest specified for such loans is higher compared to the secured loans because there is nothing the company can use to recover the loan in case of failure. 

Based On The Purpose Of The Loan:

Given below are the types of loans provided by the loan companies under this particular category:

• Education Loan:

Education loans are the financial instruments providing financial aid to the borrower so that students can pursue their education. The course of education can be anything like an undergraduate degree, postgraduate degree, or any other diploma or course. The loan companies provide education loans for both domestic and international degrees. You are just required to have the required documents with you when applying for an education loan. 

• Personal Loan:

In case you are facing a liquidity issue then you can consider getting a personal loan. You can find a reputable personal loan finance company providing personal loans to the public after completing the necessary formalities. A personal loan can be taken for anything like repayment of old debt, funding down payment of a vehicle or house, traveling internationally, purchasing furniture or any other appliances, etc. Oftentimes personal loans are offered by the loan companies after analyzing the borrower’s past relationship with the lender.

• Home Loan:

Home loans are provided by the home loan finance company to the borrowers who want to purchase a house, apartment, or a flat, buy a plot to construct a house, renovate or repair the existing house, etc. in such type of loan the property for which loan is being taken is held by the loan company and the ownership of property is only transferred to the rightful owner upon the repayment of the amount borrowed along with interest.

• Vehicle Loan:

The vehicle loans are provided by the lenders to the applicant who wants to either purchase a two-wheeler or four-wheeler automobile. The loan can be provided for either a new four-wheeler or an old one. The amount of loan is determined based on the market value of the vehicle. No loan company provides a 100% loan for the vehicle. You need to pay the downpayment with your own money.

Based On The Pledged Assets:

• Gold loan:

Many loan companies offer gold loans to their clients. All they are required to do is pledge their gold as security with the lender and have cash in the return. The weight of the gold pledge is measured and based on the purity and other things, the amount for a loan is calculated. In case the borrower fails to repay the loan, the company has a right to take over the gold for recovering the amount given as a loan.

• Loan Against Assets:

Similar to the gold loans, the borrowers can pledge their other assets such as FD certificates, shares, insurance policies, bonds, etc to borrow money from the loan companies. it is based on the value of the assets pledged, the amount of loan is borrowed by the lender. In case the borrower fails to repay the loan, the company has a right to sell the pledged assets for recovering the amount given as a loan.

Conclusion

Loan companies act as the vital pillar for the growth of the country by increasing the supply of money in the country. These companies provide financial assistance to the public including small, medium, or large business enterprises, farmers, businesses, professionals, etc for both economic and non-economic purposes. This article will provide you with all information about loan companies and the types of loans offered by them.