BANK LOANS

Group No. 3

CONTENT
Definition Advantages & Disadvantages of loans Types of loans Secured loans & its advantages Unsecured loans & its advantages Target market Loan payment Bibliography

BASICALLY
A bank loan has many terms and conditions and can be used for a number of different purposes. There are many different types of loans and they have different qualifications. To get a loan you must meet a banks credit granting criteria. Each bank has their own rules, guidelines and qualifying factors. It's a good idea to contact several banks to see who has the most favorable terms and conditions.

DEFINITION
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular instalments, or partial repayments; in an annuity, each instalment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants.
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BANKS PROVIDES LOANS

Loans are provided by all types of banks i.e. Private sector bank & co-operative banks

TYPES OF LOAN

Secured loans

Unsecured loans

1- Mortgage loan 2- Home equity loan 3- Tittle loan

1- Credit card debt 2- Personal loans 3- Emergency loan 4- Credit facilities 5- Educational loan
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SECURED LOANS
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. A mortgage loan is a secured loan in which the collateral is property, such as a home. A nonrecourse loan is a secured loan where the collateral is the only security or claim the creditor has against the borrower, and the creditor has no further recourse against the borrower for any deficiency remaining after foreclosure against the property. A repossession is a process in which property, such as a car, is taken back by the creditor when the borrower does not make payments due on the property. Depending on the jurisdiction, it may or may not require a court order.

ADVANTAGES OF SECURED LOANS

Its usually possible to borrow more than with an unsecured loan. Its also possible to spread payments over a longer period of time. Since the lender knows they have your asset as backup, there is much less uncertainty about whether they are going to get all their money back For the same reason, interest rates are often lower. Even if you have a bad credit history, you may be able to get a secured loan. Your secured asset will reassure lenders that they are able to get all their money back. However, if you currently have other debt problems, taking out further loans of any type could be a bad idea

HOME LOANS
Variety of home loans : Home purchase loan Home extension or conversion loan Home construction loan Eligible criteria : Income, age, qualifications, number of dependents, assets, liability and savings history. Documents required : Agreements to sell title deeds, approval plan, clearance certificate. Repayment period : Generally 5 to 20 years Repayment is normally taken in equated monthly installments (EMI).
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EDUCATIONAL LOANS
Educational loan is secured loan Eligible criteria : Age group between 16 to 26 years Maximum loan amount is Rs. 7.5 lakhs for studies in India & Rs. 15 lakh for abroad. Documents required : Proof of residence, photograph, proof of income of parents and academic documents Repayment : Its starts six months after completion of the course On the commencement of the job Interest charged : It is been decided by the RBI from time to time They are normally lower than other consumer loans
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VEHICLE LOAN
Vehicle loan such as : Car, scooter, motor cycle, auto rickshaw and taxi etc. Borrower should be between 21 to 58 years. Size of loans depends upon cost of vehicles. 80% to 90% cost of the vehicle financed by bank Proof of residence, Income certificate, Registration certificate of vehicle etc. Monthly basis on reducing balance or at a flat rate. Payment of processing fees Advance EMI Stamp charges Registration charges and insurance.
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Eligible criteria :

Documents required : Interest charged :

CONSUMER DURABLE LOANS

Covers such as : Refrigerators Washing machines Air conditioner Eligible criteria for this loan is : 21 to 60 years of age Gross salary must be Rs 4500 p.m Repayment period : 12 to 36 months Interest charged : 7.5% to 15%

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UNSECURED LOANS
Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages: credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds (may be secured or unsecured)

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ADVANTAGES OF UNSECURED LOANS

Preserves the equity in your property and avoid the risk of losing your home or assets. Lenders are not entitled to repossess your belongings if you struggle to make your payments although they can attempt to pursue this in court if necessary. You dont need a property or any other expensive assets to take out an unsecured loan. Its cheaper than credit/store cards for smaller purchases. Credit and store cards usually have very high interest rates, so if youre planning on repaying over a few months, you can save a lot of money by taking out an unsecured loan to fund your purchase.

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PERSONAL LOANS
Personal loan is an all purpose loan for which the end-use can be to meet any personal requirements of the borrower. Eligible criteria : Person above 21 years but below 58 years whether salaried or employed EMI should nit exceed 30% to 40% of net salary. Repayment period : 3 to 5 years Rate of interest : At present rate of interest charged is between 12% to 15% p.a. Processing fee of 1 to 3% of the loan amount sanctioned. Self employed can charge the interest amount to their profession or business.

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EMERGENCY LOANS
We need a loan every time we face a situation where we can not meet the ends meet and we need some kind of financial injection thatll cure the problem. Specially in emergencies, getting a loan can really help and once the emergency is over, repaying that loan never feels like a burden. Emergencies can vary, one might have to travel to attend an important an event like a wedding or a tragic family funeral or might require some quick cash in order to pay for expensive medicines if he/she falls sick etc.

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TARGET MARKET
Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Personal Loans mortgage loans, car loans, home equity lines of credit, credit cards, installment loans payday loans. Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds.

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ADVANTAGES AND DISADVANTAGES OF LOAN

Whether for individuals or businesses, bank loans are the most popular source of financing. They offer both advantages and disadvantages that make bank loans the best or worst option depending on the borrower's situation. Understanding the positives and negatives surrounding bank loans help people make the wisest decisions when they need loans.

Advantages
Speed
A bank can secured easily: In less than an hr.

Disadvantages
Fees
Some loans carry prepayment penalty: preventing borrower from paying the note off early without incurring extra cost.

Uses
A bank Loan can be use in no. of ways: money can be borrowed for many large no. of tickets such as. Furnitures,vehicles

Cash flow
Borrowing too much money can lead to decrease cash flow and payments can even overtake income in some cases.
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LOAN PAYMENT
The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value overtime. The fixed monthly payment P for a loan of L for n months and a monthly interest rate c is:

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BIBLIOGRAPHY
http://en.wikipedia.org/wiki/Bank_loan Vipuls (Banking & Insurance Series)

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