Types of Loans: 8 Different Types You Should Know

Over time, it becomes evident that borrowing decisions are rarely uniform, as financial needs differ in purpose, duration and scale on different occasions. This is why understanding the different types of loans available is imperative for making informed financial decisions. Broadly classified into secured and unsecured types of loans, these options are designed to address specific requirements rather than offering a single solution for all kinds of financial exigencies.

Table of Content

• Gold Loan
• Housing Finance
• Personal Loan
• Small Business Loan
• SME Loan
• Corporate Business Loan
• Vehicle Loan
• Gold Flexi Credit

Awareness of the various types of loans enables borrowers to choose one that aligns with their financial priorities and repayment capacity. The overview ahead highlights eight commonly availed types of loans in India by various lenders, including banks and non-banking financial companies (NBFCs).

Gold Loan

A gold loan is one of the widely preferred types of loans that, by its very nature, is secured by pledging gold jewelry as collateral, without the need to sell it. The type of loan enables borrowers to access funds while continuing to retain ownership of their gold assets. Among the various types of loans offered in India, a gold loan is commonly available to meet short-term financial needs, such as medical expenses, business-related needs or urgent personal commitments. Since the loan is backed by a tangible asset, like gold, processing timelines are generally faster, and documentation requirements are minimal.

Housing Finance

By its name, it is evident that housing finance refers to loans offered for purchasing, constructing or renovating a residential property. As one of the secured types of loans available, it enables individuals to spread the cost of ownership over extended repayment tenures, making it more financially manageable. Among all the loan types available, housing finance generally comes with structured repayment plans and comparatively lower interest rates due to the underlying asset.

Personal Loan

A personal loan is an unsecured type of loan that is designed to meet diverse personal financial needs. It can be used for purposes such as lifestyle expenses, travel, medical emergencies or other unforeseen needs, without any restriction on end use. Unlike secured types of loans, a personal loan does not require collateral and is typically assessed based on the applicant’s borrowing capability, credit profile and repayment history. Among the commonly availed types of loans in India, personal loans are preferred for their accessibility and relatively quick turnaround in terms of disbursement.

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Small Business Loan

A small business loan is a financing solution aimed at supporting small and medium businesses in managing their day-to-day or growth-related needs. The type of loan is commonly availed by entrepreneurs for working capital requirements, inventory management or purchase of equipment. Among the various types of loans, a small business loan plays an important role in addressing short-term funding requirements and ensuring business continuity.

SME Loan

An SME loan is one of the loan types meant for expanding operations for small and medium enterprises. This type of loan supports initiatives, such as capacity building, technology upgrades, infrastructure development and business diversification. Compared to small business loans, SME loans are designed to cater to higher funding requirements and longer planning horizons that may not be fulfilled by other types of loans meant for day-to-day business requirements.

Corporate Business Loan

Corporate business loans are designed to support the financing needs of established businesses or large enterprises. This type of business loan is commonly utilised for capital expenditure, large-scale expansion or strategic business initiatives. Among advanced types of loans offered in India, corporate business loans are structured based on factors such as financial performance, operational strength and long-term viability.

Vehicle Loan

A vehicle loan is typically availed by borrowers to finance the purchase of vehicles, including commercial vehicles as well. These loan types allow borrowers to spread the cost of ownership through fixed monthly instalments, making vehicle acquisition more convenient to avail. In vehicle loans, the vehicle itself serves as collateral, placing it among secured types of loans with relatively competitive interest rates.

Gold Flexi Credit

Gold Flexi Credit is a flexible borrowing option that combines the features of a gold loan with revolving credit access. Under this arrangement, borrowers are flexible to withdraw funds as required up to a sanctioned limit, while interest is charged only on the amount utilised. Among various types of loans availed in India, a Gold Flexi Credit offers greater control over cash flow and repayment.

Suggested Read: Difference Between Primary Security and Collateral Security in Business Loan

With a wide range of structured credit facilities, Muthoot Finance brings decades of experience in addressing diverse credit needs across individuals, businesses and enterprises alike. Its deep understanding of secured and unsecured loan offerings, combined with transparent processes and a customer-focused approach, allows Muthoot Finance to let borrowers access financial solutions aligned with their requirements. Backed by a strong nationwide footprint, Muthoot Finance continues to play a significant role in supporting responsible borrowing and long-term financial stability.