Here’s a detailed comparison of various types of loans commonly used by individuals and businesses. This will help you understand how they differ based on purpose, interest rates, tenure, collateral, and eligibility.
✅ Loan Comparison Table
| Loan Type | Purpose | Interest Rate Range | Tenure | Collateral | Key Features | Pros | Cons |
|---|---|---|---|---|---|---|---|
| Personal Loan | Medical expenses, weddings, vacations, debt consolidation, etc. | 10% – 24% p.a. | 1 – 5 years | Unsecured | Fast approval, no specific purpose required | Quick access, flexible use | Higher interest, lower loan amount |
| Home Loan | Buying, constructing, or renovating a house | 7% – 11% p.a. | 5 – 30 years | Secured by property | Long tenure, lower EMI | Lower interest, tax benefits | Requires property as collateral |
| Auto Loan | Buying vehicles like cars, bikes | 8% – 14% p.a. | 1 – 7 years | Secured by vehicle | Easy EMI options | Affordable rates, faster process | Vehicle depreciation risk |
| Education Loan | Higher studies, tuition, living expenses | 8% – 15% p.a. | 5 – 15 years | Sometimes unsecured, or by collateral | Moratorium period offered | Tax benefits, covers full expenses | Strict eligibility, co-applicant needed |
| Gold Loan | Short-term liquidity against gold ornaments | 9% – 24% p.a. | 3 months – 3 years | Secured by gold | Minimal documentation | Fast processing, low paperwork | Limited amount, high interest |
| Business Loan | Working capital, expansion, equipment purchase | 12% – 26% p.a. | 1 – 5 years | Secured or unsecured | Based on turnover and cash flows | Helps business growth | Complex approval, requires documents |
| Debt Consolidation Loan | To combine multiple debts into one | 10% – 20% p.a. | 1 – 5 years | Unsecured or secured | Simplifies payments | Reduces EMI burden | May not lower total repayment |
| Payday Loan | Emergency funds for short duration | 15% – 30%+ p.a. | Few weeks to 3 months | Unsecured | High-risk lending | Immediate funds | Extremely high interest rates |
✅ Key Factors in Loan Comparison
- Interest Rate
- Secured loans like home and auto loans generally offer lower rates.
- Unsecured loans like personal loans and payday loans are costlier.
- Tenure
- Long-tenure loans like home loans offer smaller EMIs but more total interest.
- Short tenure loans like payday loans are riskier but fast.
- Collateral Requirement
- Loans against property or gold are secured.
- Personal loans and payday loans are unsecured.
- Processing Time & Documentation
- Gold and personal loans are faster.
- Education and business loans require detailed paperwork.
- Purpose Restrictions
- Some loans are specific (home, auto, education).
- Others are flexible (personal, debt consolidation).
✅ Which Loan to Choose?
- For emergencies → Personal loan or gold loan
- For purchasing assets → Home loan or auto loan
- For education expenses → Education loan
- For business needs → Business loan
- For managing existing debts → Debt consolidation loan
- For instant, small cash requirements → Payday loan (use cautiously)