What Is The Purpose Of Open End Loans
Open end loans are loans that are given for a specific period of time. As the name suggests, you need to repay the loan within a specific time period and you can avail a higher loan amount compared to fixed rate loans. Here is a list of the open end loans that you can avail.
1. Personal Loan
This is a short-term loan that is given to the borrowers for the purpose of personal spending. The loan amount can be between Rs. 1 lakh and Rs. 2 crore depending on your repayment capacity.
2. Business Loan
This is the second most popular open end loan. You can get this loan up to Rs. 10 crore to fund your business. You will have to pay an interest rate ranging between 11% and 25%.
3. Home Loan
As the name suggests, this is a loan that can be availed to build a new home or buy an existing property. It is also known as construction loan or real estate loan. You will have to pay an interest rate of around 4% to 7.9%.
4. Car Loan
The loan is given to the borrowers to pay for the vehicle purchase. A car loan is an unsecured loan, which means that you don’t have to submit any collateral as a security to avail the loan.
5. Mortgage
It is the most common type of open end loan. You can get a home loan of up to Rs. 12 lakh and a car loan of up to Rs. 15 lakh.
6. Student Loan
A student loan is a loan given to the students to fund the education. You can get a student loan of up to Rs. 6 lakh per year.
7. Debt Consolidation
You can borrow an open end loan of Rs. 10,000 to Rs. 20,000 to pay the outstanding dues of other loans.
8. Credit Card Loan
You can get a credit card loan to clear the balance dues of the credit card.
9. Educational Loan
This is the last one but most important option. You can get an educational loan of up to Rs. 20 lakh to pay for the university, school and college fees.
Open End Loans Explained: How They Work, What Interest Rates Are and Other Details You Need to Know
What Is an Open End Loan?
An open end loan is a type of unsecured loan where you make regular monthly payments without getting a fixed interest rate.
What is an open end loan?
The phrase ‘open end’ refers to a type of loan where there is no pre-determined duration for which you will repay the loan. In an open end loan, the borrower has to pay back the loan within a period of time that varies from borrower to borrower. However, if the borrower fails to repay the loan on time, the lender may take an action against him/her and the entire debt will be recovered through the repossession of assets.
When is a loan an open end one?
There are two kinds of loans where the term is an open end loan. The first type of loan is a personal loan where the borrower has to repay the loan within a specific period of time. The other type is a secured loan. The borrower is protected by collateral if he/she fails to repay the loan on time.
What is the difference between a personal loan and a secured loan?
A personal loan is the loan which can be used to meet any of your short term needs. Such a loan is unsecured as there is no guarantee that the borrower will return the borrowed amount if he/she fails to do so.
A secured loan on the other hand, is a loan where the lender has security over the collateral in the form of real estate, gold ornaments, cars, or even other household items like furniture.
How do open end loans work?
Open end loans are unsecured and the borrowers have the option of repaying the borrowed amount within a specified time. When the borrower defaults on the repayment, the lender can seize the borrower’s assets in order to collect the loan.
What are the advantages of open end loans?
Open end loans are better than fixed-rate loans because you can change the interest rate of your open end loan whenever you want. This flexibility means that you can save on unnecessary fees, and avoid paying the loan in instalments.
What are the disadvantages of open end loans?
Open end loans also come with their own set of disadvantages. One of the drawbacks is that the lenders will also be at risk as the borrower may not repay the loan on time. This means that the lender has to bear the costs of recovering the loan.
Who can avail open end loans?
An open end loan is suitable for individuals and businesses. Open end loans are also a great choice for businesses as they are a cheaper alternative to a secured loan.
Interest rates on open end loans
The interest rates on open end loans vary according to the lenders. Usually, open end loans offer higher interest rates than conventional fixed-rate loans. Interest rates are lower in the first few years, and rise gradually during the repayment period.
also read this: Get A Loan For Your Dry Cleaning Shop | LendEDU: Latest Update 2023
Conclusion:
You have now known what an open end loan is. Now let’s see what benefits you can avail from it. If you are having a good income and want to purchase a new home, you can easily avail a home loan. Also, if you want to clear the existing dues or pay for a car or a home renovation, you can easily get a car or home loan.
But, the best thing about an open end loan is that you can take the benefit for a longer duration of time. So, if you have some debts and you want to get rid of them, you can easily get a home loan.
So, if you want to clear the existing dues or buy a house, you can get a home loan. But you will need
