A loan is a sum of money borrowed from a bank, financial institution, or lender that is repaid over time with interest. Loans can be secured (backed by collateral) or unsecured (no collateral required).

Common types of loans include:

• Personal Loan – For personal expenses, medical emergencies, travel, etc.
• Home Loan – For purchasing or constructing a house.
• Car Loan – For buying a new or used vehicle.
• Education Loan – For financing higher education.
• Business Loan – For starting or expanding a business.
• Gold Loan – A loan secured against gold jewelry.

The borrower applies for a loan from a lender. The lender approves based on eligibility, credit score, and documents. The borrower receives funds and repays in EMIs (Equated Monthly Installments) over the loan tenure, including principal and interest.

Most loans require applicants to be:

• Aged 18-65 years (varies by lender and loan type).
• Salaried or self-employed with a stable income.
• Having a good credit score (650+ for personal loans).

Eligibility is based on:

• Credit Score (higher score = better chances of approval).
• Income Level (higher income = higher loan amount eligibility).
• Existing Debt & Liabilities.
• Employment Status (salaried or self-employed).
• Collateral (for secured loans like home loans, gold loans, etc.).

Commonly required documents include:

• Identity Proof (Aadhaar, PAN, Passport, Voter ID)
• Address Proof (Utility Bill, Rental Agreement)
• Income Proof (Salary Slips, ITR, Bank Statements)
• Employment Proof (Company ID, Business Registration for self-employed)

Interest rates depend on:

• Loan type (personal loans usually have higher rates than home loans).
• Credit score (higher score = lower interest rate).
• Lender’s policies & market conditions.

Fixed Interest Rate – The interest remains the same throughout the loan tenure.
Floating Interest Rate – The interest rate changes based on market conditions.

Loans may have:

• Processing Fees (1% – 3% of the loan amount).
• Prepayment Charges (if you pay off the loan early).
• Late Payment Fees (for missing EMIs).

EMI (Equated Monthly Installment) is the fixed monthly amount you pay to repay your loan. It includes both principal and interest.

Yes, most lenders allow prepayment or foreclosure, but some may charge a prepayment penalty (0% – 5% of the remaining balance).

Missing an EMI can lead to:

• Late payment fees & penalties.
• Negative impact on credit score.
• Legal action (in extreme cases).

Some lenders allow tenure extension, but this may increase the total interest payable.

Instant loans: Approved in minutes (if eligible).
Personal loans: 1-3 working days.
Home loans: 7-15 working days (due to property verification).

Once approved, the loan amount is transferred to your bank account or directly paid to a third party (e.g., home loan to seller or car loan to dealer).