What are Assets?

In simple terms, assets are something which give you an income.

For banks and non-banking financial companies (NBFCs), assets comprise of loans which they give to borrowers. These loans fetch them interest which helps them earn revenue and be profitable.

So, when you seek a loan from a lender, the loan issued is recorded as an asset in the lender’s books of accounts and the interest that you pay is the interest generated from such asset.

When it comes to loans, they can be classified into two categories:

Unsecured loans are one which do not require a collateral security and are offered on the basis of your income and financial stability.

Secured loans, on the other hand, are those which require a collateral security and the loan amount is then determined based on the value of the security pledged for the loan.

While there are different types of loans available in the market, here are some of the most popular ones:

Home loan

Owning your home is a dream which can come true if you opt for a home loan. Home loans are offered to individuals who want to buy or construct their own home. Home loans are secured loans which are offered against the security of the house or plot of land which is being financed using the loan. Some of the characteristics of home loans include the following –

  • You can use a home loan to buy a new house, a resale property, a plot of land or an under-construction house
  • Home loans are long term loans where the repayment tenure can go up to 30 or 35 years
  • The principle repaid for the loan is allowed as a deduction under Section 80C of the Income Tax Act, 1961 up to Rs.1.5 lakhs
  • The interest paid on the loan is also allowed as a deduction under Section 24 up to Rs.2 lakhs. Moreover, if you are first time home buyer and the stamp duty value of your house is up to Rs.45 lakhs, you can claim an additional deduction on home loan interest under Section 80EEA. The limit of this deduction is Rs.1.5 lakhs

Home loans are good loans as they give you tax benefits and also help in building up  your credit score

Loan against property

While a home loan allows you to own a property, a loan against property allows you loans against a property that you already own. If you need funds for meeting any personal or business need, you can mortgage an owned property and avail a loan against its value under loan against property. Its salient features are –

  • Repayment tenure is long, up to 20 years
  • The loan amount can be used for any need that you have
  • The mortgaged property can still be let out to earn rental income

Both residential and commercial properties can be mortgaged

Business loan

As the name suggests, business loans are allowed for meeting the financial requirements of business. If a business needs funds for expansion, meeting its working capital requirements, buying raw materials, hiring labour, buying new machines or equipment, or for anything else, business loans are available. Their features include the following –

  • They can be secured or unsecured in nature
  • They can be further sub-divided into different categories for meeting specific purposes, example – working capital loan

So, if you need funds, you can apply for loans which allow you to meet your financial responsibilities. Moreover, loans are affordable so that you can easily repay them over time without hurting your pockets.