Which IIFL Finance Loan Is Right For You?

People borrow money with a specific purpose in mind, and lenders tailor their loan products on the basis of these needs. That way they can offer the right product to the customer, with varying features with respect to the duration or the quantum of borrowing and so on.

As a borrower, one may end up picking the wrong product and paying much higher fees and interest rates if the right selection is not made at the beginning. For instance, if one wants to buy a house, the borrower would need a longer duration housing loan that also comes with income tax saving tricks. They should not finance it via short-term loan products like personal loans or gold loans that carry a higher interest rate.

Here we present a primer on how to pick the right IIFL Finance loan product.

Loans are broadly of two types and within them they are again divided by use cases and associated charges.

Unsecured And Secured Loans

The two key types of loans are secured and unsecured loans. In simple terms, secured loans are loans offered by lenders after keeping something of standard value as a collateral or security. Money is lent after discounting part of the assessed value of the mortgage item.

Unsecured loans, in contrast, are borrowings that do not require a borrower to keep anything in security with the lender. This means unsecured loans have a higher risk for the lender since they won’t be able to easily recover their money in case of a default. While the onus of repaying remains with the borrower, lenders price the loan differently. As a result, such unsecured loans carry a higher rate of interest than secured loans.

Types Of Loans

Personal Loan:

If one as a would-be borrower does not own any asset and still wants to avail a loan, a personal loan is the only option for them. For instance, this is an option for someone who has just got the first job. On the flip side, if one owns a gold necklace but does not want to part with it even for a few months, then also one can take a personal loan.

Whether one gets the loan, however, is dependent on one’s creditworthiness. One should avail personal loans only in case of urgent short-term needs when they know that they can repay the small-sized loan on time and do not want the embarrassment of asking friends and family for money.

Gold Loan:

If one does have some assets and then want to borrow, then one needs to pick a loan product based on use cases. For instance, one should avail a gold loan if one has gold jewellery lying unused for short-term money needs. These loans can be of very small to very large ticket sizes. The amount depends on the value of the jewellery.

Home Loan:

If one wants to buy a house, whether under construction or ready to move in, or even land, one should opt for a home loan. Besides having a competitive rate of interest, these loans also come with tax benefits that one can avail to reduce tax outgo.

Business Loans:

If you want a loan of a few lakh or crores of rupees to set up a new business or grow an existing one, one can opt for a business loan. These loans can have different variants carrying different maximum amount and also different interest rates.

Loan Against Securities:

These are loans that are again meant for short-term exigencies and offer a lower interest than a personal loan. One needs to keep some type of securities, such as share certificates or mutual funds that are meant for long-term investments, as a collateral.
However, volatility in the value of such securities compared to the price of gold, which is more stable, is much higher. For the same reason, the interest rate charged is also higher on loans against securities.

Loan Against Property:

Lastly, one can also avail a loan against property. Just like one can borrow to buy a house, one can also borrow money against the property (including land) already owned, as long as it is not mortgaged already with another lender. This loan can be taken against a movable asset like an automobile, too. Such loans are typically taken by small entrepreneurs.

Conclusion

In a nutshell, as a borrower one needs to pick an IIFL Finance loan product based on the use case and whether one holds an asset that they may want to temporarily monetise to get a secured loan. 
Secured loans come with lower interest rates and may also have additional benefits like tax-saving instruments (in case of a housing loan). If one doesn’t have any such asset, the fallback option is a personal loan. 
In both cases, IIFL Finance has a suite of loan products to cater to all types of borrowers and their requirements.