Types of Secured Loans in India

In India, secured loans are loans that require the borrower to pledge an asset as collateral in exchange for the loan amount. These loans typically come with lower interest rates and higher loan amounts, as the lender has a security (the asset) in case the borrower defaults. Below are the common types of secured loans available in India:

1. Home Loan

Purpose: A loan taken to purchase or construct a house. The property being purchased or constructed acts as collateral.
Loan Amount: Typically, up to 80-90% of the property’s market value.
Repayment Tenure: Long-term, generally up to 30 years.
Interest Rates: Relatively low, usually between 7-10%.
Collateral: The house or property itself.

2. Loan Against Property (LAP)

Purpose: A loan where the borrower pledges their residential, commercial, or industrial property as collateral. The loan can be used for any personal or business need.
Loan Amount: Up to 50-70% of the property’s market value.
Repayment Tenure: Medium to long-term, typically 10-15 years.
Interest Rates: Lower than unsecured loans, generally 8-14%.
Collateral: Residential, commercial, or industrial property.

3. Gold Loan

Purpose: A secured loan where gold jewelry or coins are pledged as collateral. The loan is used for various purposes such as personal expenses, education, medical needs, etc.
Loan Amount: Up to 75-90% of the gold’s market value.
Repayment Tenure: Short-term, usually 6 months to 2 years.
Interest Rates: Generally between 9-24%.
Collateral: Gold jewelry or coins.

4. Vehicle Loan (Car/Bike Loan)

Purpose: A loan taken to purchase a new or used car or bike. The vehicle itself acts as collateral.
Loan Amount: Up to 85-100% of the vehicle’s cost.
Repayment Tenure: Typically, 3 to 7 years.
Interest Rates: Usually between 8-15%.
Collateral: The vehicle being purchased.

5. Education Loan (Secured)

Purpose: A loan taken to finance higher education, either in India or abroad. The loan may require collateral if the amount is large.
Loan Amount: Can range from ₹5 lakh to ₹50 lakh or more.
Repayment Tenure: Typically, 5 to 15 years.
Interest Rates: Lower than unsecured personal loans, usually 8-12%.
Collateral: Immovable property, fixed deposits, or other assets (for larger amounts).

6. Home Equity Loan

Purpose: A loan where the borrower leverages the equity in their home to obtain funds. The funds can be used for personal or business purposes.
Loan Amount: Based on the equity in the home, typically up to 70-80% of the home’s market value.
Repayment Tenure: Medium to long-term, up to 15-20 years.
Interest Rates: Similar to loan against property, around 8-14%.
Collateral: The borrower’s home.

7. Loan Against Fixed Deposits

Purpose: A loan where the borrower pledges their fixed deposit (FD) as collateral. This is often used as an alternative to breaking the FD.
Loan Amount: Usually up to 70-90% of the FD’s value.
Repayment Tenure: Matches the tenure of the fixed deposit, usually up to 5 years.
Interest Rates: Generally 1-2% higher than the FD interest rate.
Collateral: Fixed deposit.

8. Loan Against Securities

Purpose: A loan where the borrower pledges financial securities like shares, mutual funds, bonds, or debentures as collateral.
Loan Amount: Typically up to 50-70% of the value of the pledged securities.
Repayment Tenure: Short to medium-term, usually up to 3 years.
Interest Rates: Generally lower than personal loans, around 10-14%.
Collateral: Financial securities such as shares, mutual funds, bonds.

9. Loan Against Insurance Policy

Purpose: A loan taken by pledging the surrender value of a life insurance policy as collateral.
Loan Amount: Typically up to 80-90% of the surrender value of the policy.
Repayment Tenure: Varies, typically up to the policy maturity period.
Interest Rates: Usually between 9-12%.
Collateral: Life insurance policy.

10. Agricultural Loan (Secured)

Purpose: A loan offered to farmers, usually secured against agricultural land, to finance agricultural activities such as purchasing seeds, fertilizers, or farming equipment.
Loan Amount: Depends on the land value and farming needs.
Repayment Tenure: Varies, usually 5 to 10 years.
Interest Rates: Lower than regular business loans, typically between 7-12%.
Collateral: Agricultural land or machinery.

11. Business Loan (Secured)

Purpose: A loan offered to businesses by pledging assets such as property, machinery, or inventory as collateral. Used for business expansion, working capital, or purchasing equipment.
Loan Amount: Based on the value of the collateral, typically up to ₹5 crore or more.
Repayment Tenure: Medium to long-term, usually up to 15 years.
Interest Rates: Lower than unsecured business loans, generally 8-14%.
Collateral: Property, machinery, or inventory.

12. Loan Against Warehouse Receipts

Purpose: A loan taken by farmers or traders by pledging warehouse receipts (which serve as proof of stored agricultural produce) as collateral.
Loan Amount: Based on the value of the goods stored in the warehouse.
Repayment Tenure: Short-term, usually up to 12 months.
Interest Rates: Typically between 8-14%.
Collateral: Warehouse receipts for stored agricultural produce.

13. Machinery Loan

Purpose: A loan secured by pledging business machinery or equipment as collateral. Often used by manufacturers or industrial businesses.
Loan Amount: Based on the value of the machinery, typically up to ₹1 crore or more.
Repayment Tenure: Medium-term, up to 7-10 years.
Interest Rates: Generally lower than unsecured loans, around 9-15%.
Collateral: Business machinery or equipment.

14. Vehicle Loan (Commercial)

Purpose: A loan used to purchase commercial vehicles like trucks, buses, or taxis, with the vehicle itself serving as collateral.
Loan Amount: Typically up to 85-90% of the vehicle’s cost.
Repayment Tenure: Usually between 3 to 7 years.
Interest Rates: Around 10-15%.
Collateral: The commercial vehicle being purchased.

15. Reverse Mortgage Loan

Purpose: Designed for senior citizens, this loan allows them to borrow money by pledging their residential property as collateral. The loan is repaid when the property is sold or upon the borrower’s death.
Loan Amount: Based on the property’s market value, typically up to 50-60%.
Repayment Tenure: Loan tenure lasts until the borrower passes away or sells the property.
Interest Rates: Around 9-14%.
Collateral: The borrower’s residential property.

Key Features Across Secured Loan Types:

Collateral: The main defining feature of a secured loan is that the borrower must pledge an asset (property, gold, vehicle, financial securities, etc.) as collateral.
Lower Interest Rates: Secured loans typically come with lower interest rates compared to unsecured loans due to the reduced risk for lenders.
Higher Loan Amounts: Secured loans allow borrowers to access larger amounts due to the presence of collateral.
Longer Repayment Tenure: These loans often come with longer repayment tenures, making them more suitable for larger expenses.
Risk of Asset Seizure: If the borrower defaults, the lender has the right to seize and sell the collateral to recover the loan amount.

These secured loan types cater to a wide range of financial needs, from home purchases to business expansion, offering borrowers lower interest rates and larger loan amounts in exchange for pledging valuable assets.